Standing Committee A

[Mr. John McWilliam in the Chair]

Finance Bill

(except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) - Clause 270 - Commencement

Question proposed [this day], That the clause stand part of the Bill. 
 Question again proposed.

Howard Flight: I welcome you to chair our deliberations this afternoon, Mr. McWilliam.
 I shall make only two points as we come to the end of the pension fund provisions. First, the clause provides for the Treasury to implement what it sees fit, when it sees fit. Does it intend to implement any of the measures ahead of A-day? 
 Secondly, and a related point, the Green Paper stated that the changes would come into effect a year earlier. The Minister will be aware that the changes are of considerable import to those aged 74 or 75. I have received many letters from people saying that they had expected to be able to make use of some of the changes relating to not having to buy an annuity at 75, but now, because the changes have been postponed for a year, they are just outside. Will the Government at least consider advancing the new option not to have to buy an annuity—admittedly it is specifically designed for certain religious groups—to a date earlier than the present start date of April 2006?

John Healey: I welcome you to the Chair this afternoon, Mr. McWilliam.
 As the hon. Member for Arundel and South Downs (Mr. Flight) said, we have reached the final clause on pensions simplification and, as I am sure my hon. Friend the Financial Secretary would have said if she had been here this afternoon, in many ways we have reached the end in the Committee proceedings. However, in a sense this is the point at which the next stage of pensions simplification starts, because the clause sets out the date when the new regime will take effect. 
 I accept what the hon. Gentleman says about the importance of these issues, but it will take some time to prepare some of the schemes for such radical simplification. My hon. Friend considered all the arguments and the 2004 Budget before deciding to move implementation to April 2006. It was not a move that she took lightly, but we want to see the benefits of the new regime as soon as possible. 
 The hon. Gentleman asked whether the fact that only parts of the pensions simplification legislation come into force on 6 April 2006 means that we might 
 bring the start date forward. I assure him that we do not intend to do so. The new simplified regime for pensions will come into effect, as announced, on 6 April 2006 and not sooner. 
 The provision to allow orders or regulations made under the pensions simplification provisions at any time after the passing of the Bill is intended to ensure that any orders or regulations that are necessary to give effect to the simplified regime for pensions taxation can be made in advance of 6 April 2006. 
 Perhaps I may conclude, as I believe my hon. Friend the Financial Secretary might have done, in the way that she started the debates on pension simplification. She quoted the words of Geof Pearson, Sainsbury's pensions manager, who said: 
''Although we helped shape the policy, it needs a Government that listens to the pensions industry. Sometimes we need to congratulate politicians and civil servants and now is the time."
 I commend the clause to the Committee. 
 Question put and agreed to. 
 Clause 270 ordered to stand part of the Bill.

Clause 271 - Certain receipts not to be tarrif receipts

Question proposed, That the clause stand part of the Bill.

Howard Flight: As the Committee will be aware, clauses 271 and 272 are the results of consultation with the oil industry, and they are broadly what it expects. Some issues have been raised about their impact on how companies in the sector do business. I cannot resist making the point that when debating the extra 10 per cent. oil tax we said that it was not a particularly sensible way of optimising a depleting oil reserve and a changing corporate structure that was likely to exploit it, so we are pleased that the clauses and schedule 35 go some way towards addressing those concerns.
 Clause 271 is intended to reduce the price of extracting the smaller reserves in the North sea by making certain receipts exempt from tariff pricing. The expectation is that savings will be passed on through the supply line, thereby increasing the attractiveness of extraction. The industry expects it, and thinks that it is the best it can get. 
 There is a potential drawback. The Revenue is embarking on a review of the costs outside the tariff scheme to ascertain whether they are all allowable for tax. That could put costs back into the system, so I would welcome the Economic Secretary's comments on that.

John Healey: As the hon. Gentleman said, the clause is the result of extensive consultation with the industry, and it is broadly what it expects and welcomes. I do not want to reopen the debate on the supplementary charge, but I am pleased to see, as part of the package that we have introduced alongside the charge, strong signs that the level of exploration, activity and investment in the North sea is increasing.
 Clause 270 and schedule 35 are good examples of the Government and industry working together to achieve a joint aim, which is to ensure the maximum 
 economic recovery of oil and gas reserves from the North sea. We recognise that the North sea is entering a mature phase where future developments depend on extending the life of existing infrastructure. Officials and Ministers have spent considerable time consulting the industry over exactly what types of new business need to benefit from this measure. 
 New finds are usually smaller and often need to pay tariffs to use the existing infrastructure of bigger, older fields that can represent up to 60 per cent. of the total operating costs. Some new fields are only marginally profitable. The change to a lower tariff charge will improve the economics of those marginal projects and so ensure their development. 
 Where the offering of services to older fields is truly new business, we want those projects to benefit from the removal of petroleum revenue tax. The legislation contains rules to ensure that such new business will benefit, while existing business that has already been found to be economic will not. It ensures that help is provided where it is needed without unnecessarily reducing benefits to taxpayers. New business that will be eligible for the reduction means business under contracts agreed after 9 April 2003, which was the date of the 2003 Budget. 
 We also want to encourage new business from overseas, such as the importing of gas from Norway. The provisions will help in that respect, too. The measure has been warmly welcomed by the industry, and I commend the clause to the Committee. 
 Question put and agreed to. 
 Clause 271 ordered to stand part of the Bill. 
 Schedule 35 agreed to.

Clause 272 - Petroleum extraction activities: exploration expenditure supplement

Question proposed, That the clause stand part of the Bill.

Howard Flight: The clause gives a credit for the costs of exploration if they cannot immediately be deducted for tax. The industry has expected the clause and believes that it is the best that it will get, but the credit is of value only if the field under exploration is profitable, something that obviously cannot be guaranteed because of the very nature of exploration. Therefore, there is some question as to whether the credit will encourage any of the major operators, although some of the smaller operators may feel that they will benefit.
 Question put and agreed to. 
 Clause 272 ordered to stand part of the Bill. 
 Schedule 36 agreed to.

Clause 273 - Restrictions on expenditure allowable

Question proposed, That the clause stand part of the Bill.

Howard Flight: This is an anti-avoidance measure designed to stop connected-party transactions, which
 increase the cost of qualifying expenditure. I am advised that the tax planning that it addresses possibly did not work anyway, and that there is therefore no particular objection from the industry to the proposal.
 Question put and agreed to. 
 Clause 273 ordered to stand part of the Bill.

Clause 274 - Terminal losses

Question proposed, That the clause stand part of the Bill.

Howard Flight: Again, this is an anti-avoidance measure. It is designed to correct an imbalance in the rules on terminal losses. It had been possible to circumvent the intended restrictions on loss carried back by transferring fields to operators for a short time during which they were guaranteed to make a loss. The industry views the proposal as sensible.
 Question put and agreed to. 
 Clause 274 ordered to stand part of the Bill.

Clause 275 - Supplies to producers of commodities

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: The clause is seemingly innocuous and inoffensive. Its purpose, which is to avoid the double taxation on certain fuels that is a consequence of the introduction of the climate change levy, is certainly sensible. However, a few points must be made about it.
 The reason that we need the clause is the ever-increasing complexity of the levy itself. Many argue that it was designed the wrong way round. If its purpose really is environmental, the means of achieving the objective would be to put a tax on carbon-rich energy sources and to tax the producers of energy according to the pollution that they produce. It would also be worth examining the use of the tax system to affect the production of so-called greenhouse gases. However, because the Government did not do that, they now find themselves in a mess and introducing clauses such as this one. 
 The Government avoided introducing certain taxes because they did not want to hit domestic customers, so they went for a tax on firms. I believe that they were ultimately interested in revenue raising, despite their protestations of revenue-neutrality. The tax was designed back to front, which is why we have complexity. 
 Edward Troup, the head of business tax policy at Customs and Inland Revenue—the new joint department—has advised Governments of both political persuasions. He recently said something that has a bearing on this clause: 
''Once the Government started down this particular road''—
 the climate change levy road— 
''from the wrong end of town, the complexities, dead ends and diversions it would find itself in were inevitable.''
 Clause 275 is one of those complexities. 
 The Engineering Employers Federation made a similar point. It said: 
''we have highlighted numerous anomalies and market distortions arising from the current design of the climate change levy and presented survey evidence on the impact''.
 It is also worried about the issue. In previous years, we had lengthy debates about the climate change levy in Committee and on the Floor of the House. I do not think that the broader issues need to be reopened. The only point that needs and should be made at this juncture is that this complexity is an attempt to iron out the anomaly that is directly caused by the design of the tax. It is almost certainly not having the effects that were intended, or at least announced as the intention, when the Government introduced the tax. 
 I suspect that we will find, as time goes by, that the philosophy of the tax is askew, and sooner or later we will need a fundamental rethink. In the meantime, we will have to make do with letting clauses such as this through to try to mop up some of the more egregious difficulties, anomalies and complexities.

John Healey: This is indeed a narrow clause and I will not be tempted towards the broader territory through which the hon. Member for Chichester (Mr. Tyrie) roamed, except to say that, since its introduction in 2001, the climate change levy and the associated climate change agreements are starting to have a proven beneficial effect on the level of emissions and the UK's contribution to the global challenge that, we must recognise, is so serious—that of global warming.
 On clause 275, it is in the nature of an energy tax that, where taxable energy supplies are used to make other taxable energy supplies, the initial supply should be exempted to avoid the problem of double taxation, as the hon. Gentleman said. The climate change levy has had such exemptions in its legislation ever since its introduction in 2001. 
 However, technological advances mean that there are new energy products on the market, such as biodiesel and bioethanol, which are produced from renewable material such as rapeseed, waste vegetable oil, tallow and, in the case of bioethanol, sugar and wheat. CCL legislation needs to be updated to take account of such products, to ensure that they are not subject to the problem of double taxation in the levy. 
 The clause will provide that cover. It will also provide that any necessary changes to the scope of the exemption be made by statutory instrument. That will allow us to incorporate supplies that are used to create further new fuels in the exemption without having to wait for the annual Finance Bill. This modest measure is welcomed by environmental groups and by the industry. It will also be a useful source of encouragement for the use of new, more environmentally friendly fuels in the future. I commend the clause to the Committee. 
 Question put and agreed to. 
 Clause 275 ordered to stand part of the Bill. 
 Clause 276 ordered to stand part of the Bill.

Clause 277 - Transitional tax credit in Northern Ireland: new scheme

John Healey: I beg to move amendment No. 157, in
clause 277, page 231, line 14, leave out '2012' and insert '2011'.
 This is an important but relatively small amendment. As drafted, the clause would mean that the relief scheme for aggregates in Northern Ireland, and the regulations made under it, will come to an end on 31 March 2012. The amendment brings forward by one year the end date of the scheme. 
 The change is necessary to reflect the terms of the European Commission's approval for the extended relief scheme. That decision was announced on 7 May 2004, after the publication of the Finance Bill. The Commission accepted what was a bold and radical case for a new relief scheme for the aggregates industry in Northern Ireland—one that we advanced and the Commission processed and approved in almost record time. It added one condition to accepting the UK's state aid application in the field. The Government were seeking approval for the new scheme to run until 31 March 2012, which would have meant that businesses would have received tax relief for a period of 10 years after the introduction of the original scheme in 2002. However, the environmental guidelines on state aid, which provided us with the basis for the UK's application, stipulate that companies subject to such reliefs should be expected to pay a substantial amount of the tax over a 10-year period. As companies in Northern Ireland subject to the old relief paid no tax at all in the first year of the original five-year scheme, the Commission decided that tax relief should apply for only nine years overall and that the new scheme should therefore end on 31 March 2011. 
 In practice, the Commission decision is unlikely to have a significant impact because the UK is free to seek a renewal of the relief at the end of the scheme if the Government decide at that time that they wish to continue with it and there is a case for doing so. I hope that, on that basis, the Committee will accept the amendment. 
 Amendment agreed to. 
 Question proposed, That the clause, as amended, stand part of the Bill.

Rob Marris: I would like my hon. Friend the Economic Secretary to explain the thinking behind the clause, because it appears to introduce yet more subsidies for Northern Ireland by extending the transitional relief, albeit that the amendment has cut that back by one year. Perhaps he could explain why that is necessary in terms of the structure of the economy of Northern Ireland. Some 60 per cent. of the gross domestic product of that economy is down to the Government, as opposed to about 40 per cent. in the rest of the United Kingdom. If—

John McWilliam: Order. The Economic Secretary has explained that the amendment is intended to enable us to comply with a European ruling. The economy of
 Northern Ireland is beyond the scope of the amendment.

Rob Marris: Forgive me. I misunderstood and thought that we were on the stand part debate.

John McWilliam: We are. I beg the hon. Gentleman's pardon.

Rob Marris: I will, of course, be guided by you when it comes to how broadly the discussion can range, Mr. McWilliam. However, it is in the context of the relationship between the finances of Great Britain and Northern Ireland that I wish to ask my question.

John McWilliam: Order. The clause is limited to the aggregates regulations, so unless the hon. Gentleman can relate their impact to the whole economy of Northern Ireland, he is in trouble.

Rob Marris: With respect, Mr. McWilliam, I was just about to try to do that. It appears to me—I may have misunderstood—that, pursuant to clause 277, the aggregates levy regime would be rather more favourable in Northern Ireland than in Great Britain. If that is the case, will the Economic Secretary explain why and put his reply in the context of the financial arrangements between Great Britain and Northern Ireland?

John Healey: I had not proposed to elaborate on this matter to the Committee, but I am happy to do so. The short answer to my hon. Friend's question is that Northern Ireland, unlike the rest of the UK, shares a land border—quite a long one, with many crossing points—with another European member state. There are other features of the Northern Ireland economy—particularly in the case of the aggregates industry—that mean that it is a special and unique case as far as the UK is concerned. My hon. Friend may know that the Northern Ireland Affairs Committee has taken a particular interest in this matter and has produced two reports on it. Under the able guidance of its Chairman, it has contributed considerably to the Government's thinking.
 Given the unique circumstances in Northern Ireland, our original relief scheme was introduced at the inception of the aggregates levy in 2002 for companies in Northern Ireland that manufacture value-added products using aggregate—in other words, concrete, mortar and asphalt—to allow the sector time to adjust to the changed market conditions brought about by the introduction of the levy: for instance, by increasing the use of recycled material and other non-taxed alternatives. The relief was due to diminish over the five years and end after that. 
 Since the introduction of the original levy in 2002, we have consulted widely with the industry—in passing, I pay tribute to the Quarry Products Association of Northern Ireland and its director, Gordon Best, for the role that he has played—commissioned detailed expert research into the impact in Northern Ireland of the operation of the scheme, and listened to the concerns of wider business in Northern Ireland. In doing so we have gathered evidence confirming that, given Northern Ireland's 
 unique circumstances, the levy as currently structured, even with the five-year digressive relief, was simply unlikely to achieve the aims we had set for it: to reduce the environmental impact of quarrying, and to increase the use of recycled or alternative materials to primary aggregates and therefore the level of virgin aggregate extraction.

John Burnett: The hon. Member for Wolverhampton, South-West (Rob Marris) has raised a valid and extremely important point. In due course there will be a peace dividend for Northern Ireland, and other regions of the UK will be looking more closely at the level of Government investment and expenditure paid in that area.

John Healey: That is indeed valid, if not rather broad in the context of the aggregates levy in Northern Ireland.
 My hon. Friend was asking in particular why, in the circumstances of the design of the aggregates levy, special provision was required for Northern Ireland. I hope that I have explained both the reason for the initial relief scheme and our judgment, based on evidence, that the scheme was insufficient to achieve the environmental aims that we had set for the levy in Northern Ireland. 
 We announced at the pre-Budget report that we would introduce a new scheme, were we to get European Commission state aid approval to do so, to extend the scope and the duration of the original scheme. Relief is tied to industry agreements to improve levels of environmental performance under the new scheme, which will deliver the gains in Northern Ireland that we wish to see in a way that the previous arrangement and operation of the levy simply would not. I hope that my hon. Friend is now rather clearer. The new scheme is more generous, better suited to Northern Ireland's circumstances, and strongly welcomed by Northern Irish industry and our own Northern Ireland Affairs Committee. I hope that this Committee will give its approval. 
 Question put and agreed to. 
 Clause 277, as amended, ordered to stand part of the Bill.

Clause 278 - Lorry road-user charge

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: This is another apparently innocuous clause that, if we scratch it, looks less nice underneath than it appears on the surface. I wish that we could just nod this through without making a few remarks, but we cannot. The primary purpose of the clause is to assign responsibility for preparing the lorry road user charge to Customs and Excise. The clause has a secondary purpose in new subsection (4)(b), which is that the charge
''shall be administered and enforced in accordance with such provisions as Parliament may determine''.
 In other words, I presume that the provision confers general powers that would enable the Government to 
 vary whatever is introduced by order. Perhaps the Minister can tell me whether that is the case, as I could not tell from reading the provision. 
 The introduction of that charge raises some big questions, which we have hardly debated at all. My first thought was, ''When will we get a chance to debate these matters?''. The progress report that was published with the Budget seems to be a support document for the clause, as it cannot be linked to any other. I see that there is an agreement or an acceptance that there will be a debate when the legislation—the framework legislation, judging by its description—on the structure of collection and administration of the charge and key provisions is introduced in spring 2005. 
 Several timetables—technical and legal—are set out in the document and parliamentary scrutiny barely gets a mention in any of them. Page 17 is the only spot on which I can find it, so that is why I am so concerned to ensure that some points are put on the record. For example, in paragraphs 1.4 and 1.5, there are lengthy timetables setting out how the legislation will come into force. There is no mention of legislative scrutiny. 
 I will only allude to the big questions that the Customs and Excise will have to consider when the provisions are passed to it. I will not try to answer them. That is for a later date. It is worth anyone who is interested in the proposed new charge taking a look at the extraordinary document by Professor Alan McKinnon, entitled, ''Lorry Road User Charging: A Review of the UK Government's Proposals'', which is no doubt being studied intently by Customs, although it does not yet have responsibility until the clause is enacted. It is a devastating assault on the Government's proposals in principle and practice.

John McWilliam: Order. I am listening to the hon. Gentleman quite carefully and I am looking at the clause. He seems to be dealing with the question of the level of the charge and whether it should be levied at all. The clause is quite narrow. It details only how and by whom such a charge, if any, should be dealt with.

Andrew Tyrie: I am trying to set the framework for what I think Customs will want to consider when it assumes responsibility for the clause. The primary purpose of the clause is to give it that responsibility, and I would like to make some suggestions about what Customs will want to consider. I hope that that is in order, particularly as a Government consultation document on the subject was published with the Budget and this is the only opportunity to discuss those issues. With your permission, Mr. McWilliam, I will continue.
 Professor McKinnon's document is a devastating attack on almost every aspect of this proposal, which Customs is almost certainly examining.

John McWilliam: Order. The hon. Gentleman is clearly out of order. The clause does not deal with the lorry road user charge per se, or the basis on which it is levied. It details how the charge is dealt with after it has been levied. The clause is incredibly narrow, if he cares to examine the wording. He should be careful as he is discussing matters far too broadly.

Andrew Tyrie: That is all right. I will give it a rest.

John Healey: Thank you, Mr. McWilliam. As you quite rightly say, the clause is limited. As the hon. Member for Chichester said, its primary purpose is to assign responsibility for operating a lorry road user charge to Customs and Excise. Responsibility will pass to the new, integrated Revenue and Customs department when that is set up.
 The clause also specifies the accounting arrangements for money collected as lorry road user charge. It deals only with those two points. It does not confer general powers and subsection (2) does not give the Government any power to do anything beyond those two points without further reference to Parliament. 
 Fuller details of the scheme will follow in future Bills. That may be the opportunity for the hon. Gentleman to pose his bigger questions, although there are always opportunities in the House for the Opposition to raise points and to ask big questions. 
 The inclusion of the clause in this year's Finance Bill will give suppliers certainty when they are preparing to bid to provide the services set out in our recently published procurement prospectus, so that they know with whom they will be negotiating and, eventually, contracting. 
 The lorry road user charge is being developed to modernise the method of taxing heavy goods vehicles. We will charge them according to the distance that they drive in the UK—

John McWilliam: Order. Now the Minister is going wide.

John Healey: Thank you for that guidance, Mr. McWilliam.
 The provision is part of our programme of modernising the method of taxing heavy goods vehicles. Customs is already working on developing the lorry road user charge in close co-operation with the Department for Transport, other parts of government and, in particular, the industry, which has played an influential role in the development of our ideas. 
 The clause and the publication of progress report 3, alongside the Budget, mark a new phase in the lorry road user charge programme. It is an important step, which has kicked off the procurement exercise for the technology involved, and I commend the clause to the Committee. 
 Question put and agreed to. 
 Clause 278 ordered to stand part of the Bill.

Clause 279 - Delivery of accounts etc

Question proposed, That the clause stand part of the Bill.

Howard Flight: We broadly welcome this clause and the clauses related to it.

John McWilliam: Order. I have looked closely at this clause and the next one and they seem to be
 inextricably linked. If the hon. Gentleman wants to take both together, I give him total liberty to do so.

Howard Flight: I thank you for your common-sense guidance, Mr. McWilliam, but I do not have much to say on the clauses.
 Personal representatives of estates where no inheritance tax is payable, or where simplified inheritance tax accounts are late, negligent or fraudulent are the taxpayers who will be affected. From Royal Assent, with the exception of larger estates and certain other particular situations, an inheritance tax account will be required only where there is tax to pay. The other clauses deal with penalty rules. 
 One of the few bits of positive progress in taxation has been the probate office system for dealing with estates below the inheritance tax threshold. The much reduced arrangements have worked extremely well and have saved families the legal expense entailed by a full probate. As I understand it, these measures go further, based on the success of the simplification that has already taken place. The only problems that could arise for personal representatives are where delays occur. I am out of order, Mr. McWilliam, but I hoped that these clauses would give me the chance to present new clause 6. However, that will have to wait until Thursday.

Dawn Primarolo: I am grateful for the hon. Gentleman's succinct summary of clauses 279 to 281, which create a one-stop shop and remove a further 30,000 or more estates from the accepted procedure. I look forward to debating new clause 6 and commend the clause to the Committee.

John McWilliam: The problem with new clause 6 is that it does not hang on any of those three clauses, so we could not hang it on anything.

Andrew Tyrie: I only want to ask one slightly mischievous question. The Paymaster General has explained with admirable clarity what the clause is all about, as has my hon. Friend the Member for Arundel and South Downs. It is important that we keep an eye on the explanatory notes. I had to read the first line of the first paragraph of the summary notes on clause 279 several times before I could work out whether it meant anything at all. I know that the Paymaster General does not have time to clear all such notes before they go through, but she should take a look at this one. I will give it a go, so that the Committee can get a feel. It says:
''This clause, together with clause 280''—
 as you, Mr. McWilliam just said, they go together— 
''reconstructs the enabling powers to allow the current regulations to be amended to provide for the extension of the existing simplified procedures.''
 After a while, it began to dawn on me that I knew what that meant. However, it took me three or four goes. Perhaps the Paymaster General got there in one go, but she did much better—brilliantly, in fact—in the opening line of her speech. Can we have a look at the explanatory notes and keep an eye on them for mumbo-jumbo?

John McWilliam: I advise the Committee that the only thing before it is the clause, the schedule or the amendments. The explanatory notes belong to whoever wrote them, however accurate they may be. They are not a matter for the Committee.

Dawn Primarolo: None the less, I take the hon. Gentleman's point. ''Provided for the extension of existing simplified procedure'' might have been a more succinct and clearer way of putting it. I am always happy for his assistance him in making sure that any explanation of the legislation is as clear as possible. I am grateful to him for spotting that.

John Burnett: Valuation is a subjective matter. It is an art, not a science. Particularly where there are assets such as real estate and one is on the border, there will be occasions when a genuine valuation is obtained that takes the estate below the threshold. If that valuation is, in due course, challenged and if the valuer concerned has made a genuine stab at the valuation, presumably, there will not be penalties if an estate is judged to be worth more than the value in the exemption.

Dawn Primarolo: As I understand the legislation—we are ranging across all the clauses—where genuine error is demonstrated, or something unforeseen occurred in the process, the reasonable excuse provision—it is not called that but something else that escapes me for the moment—would be applied, as it is elsewhere in the Inland Revenue with regard to penalties.
 The purpose of the amendments is to ensure that both unrepresented and represented taxpayers have the opportunity to use the one-stop shop and have confirmation that the return is correct. If any inquiries arose from that, they would be pinpointed and the taxpayer would be told immediately. 
 As the hon. Gentleman often pushes me on a number of clauses across any Finance Bill, because he has served on many, I assure him that the appeals procedure used against any penalties would, in this process, be the same as in any other. Therefore, reasonableness would be used as a measure. 
 Question put and agreed to. 
 Clause 279 ordered to stand part of the Bill.

Clause 280 - Grant of probate

Question proposed, That the clause stand part of the Bill.

Rob Marris: I want to ask my right hon. Friend about line 3 of clause 280, which refers to
''refusal of grant of probate where inheritance tax unpaid''.
 I ask this as a former solicitor. Will she assure me that the words ''grant of probate'' in that context, and in the clause generally, also refer to letters of administration? A grant of probate, as she may know, is made when someone dies with a will. A grant of letters of administration is made when someone dies intestate, but inheritance tax may still have to be paid.

Dawn Primarolo: I assure my hon. Friend that the answer to his question is yes. While I may not be as familiar with that area as he clearly is with his skills as a solicitor, I know that clauses 279 to 281 are absolutely in line with the current arrangements.

John McWilliam: I draw the hon. Gentleman's attention to the fact that the wording he refers to comes from section 109 of the Supreme Court act 1981. It is the title of that section, and that is all. Whatever is in it, is in that particular piece of legislation, not this one.
 Question put and agreed to. 
 Clause 280 ordered to stand part of the Bill. 
 Clause 281 ordered to stand part of the Bill.

Clause 290 - Meaning of ''notifiable arrangements'' and ''notifiable proposal''

Dawn Primarolo: I beg to move amendment No. 554, in
clause 290, page 241, line 20, after 'enable' insert 
 'or might be expected to enable'.

John McWilliam: With this it will be convenient to discuss the following:
 Amendment No. 367, in 
clause 290, page 241, line 22, leave out paragraph (c) and insert— 
 '(c) have as their main purpose the obtaining of that tax advantage or making that tax advantage available to another person.'.
 Government amendment No. 563. 
 It may also be convenient to take clause stand part along with those amendments, because this is a group of clauses dealing with broadly the same sort of thing. It might be easier for hon. Members if we do it that way, and then they will not get out of order.

John Burnett: On a point of order, Mr. McWilliam. I might have misheard you, but this is an important series of clauses. When we debate clause 290, will you allow us to range far and wide on the disclosure provisions as a stand part debate initially?

John McWilliam: I thought that was what I said.

John Burnett: I am sorry. Owing to earlier years' service in the Marines, I do not hear too well, so it would help if you would speak up.

Howard Flight: This is probably the most controversial part of the Finance Bill. In a sense, clause 290 is the most important issue of focus. [Interruption.] It lays down that the notifiable arrangements to be reported will be prescribed by Treasury regulations. We have now seen the draft regulations—[Interruption.]

John McWilliam: Order. There seems to be a constant conversation in Committee, quite apart from what the hon. Gentleman is saying. It would be helpful, at least to me, if it could cease so that I can hear what he is saying.

Howard Flight: I thank you, Mr. McWilliam. I certainly do not think that hon. Members were endeavouring to shout me down.
 Since the regulations were published, there has been a fair amount of criticism and complaints. In particular, five City law firms have written to the Revenue—I will revert to that in due course. At the heart of the issue, as far as we see it, is the fact that the reporting of the tax avoidance schemes being marketed is in essence a no-brainer. People know when they are marketing them, and when such a scheme is being marketed to them. I submit that those schemes represent overwhelmingly the greater part of the nuisance that these clauses are designed to address, and I make the up-front comment that framing the clauses much more widely than that has led to a lack of clarity about what will and will not be required. 
 To some extent, the regulations have narrowed down what is in the Bill. I understand that some of them will clarify what they will not cover. However, unlike the VAT clauses, which impose obligations primarily on taxpayers, the obligation in these clauses is on promoters. As the clauses deal mainly with marketing schemes, our basic argument is that they and the regulations should be cut down so that they are much more tightly aimed at such schemes. The compliance burden on businesses must be balanced against the benefits. Indeed, even with the amendments that we have tabled, there is a risk that major burdens will be placed on businesses and on the Inland Revenue itself, as only £1.5 million has been provided to finance the staff who will have to deal with the reports. 
 Before turning to the amendment, on the assumption that it will not be accepted, I would appreciate more guidance on what ''main benefit'' means and how it differs from the main purpose test, which is in amendment No. 367 and in some anti-avoidance legislation. If a structure is economically advantageous and would exist irrespective of tax relief, can the tax advantage still be a main benefit? Is the intention to deter transactions entered into to avoid tax, or alternatively, to identify all transactions that avoid tax, irrespective of the motivation? 
 In the regulations, the focus is on employment products and financial products. That is broadly welcome and sensible, but the way in which financial products are defined under the equation is open to fairly wide interpretation. Amendment No. 367 suggests that it would be better to define more closely the main identifiers of notifiable arrangements, with the aim of excluding from notification normal commercial transactions that are merely structured in a tax-efficient way. In other words, transactions that simply reflect Lord Clyde's famous dictum about the shovel in the store would not have to be reported. There is a fundamental difference, grey though the territory is, between standard tax planning and clever tax avoidance schemes. Ideally, it would be sensible to switch from main benefit to a main purpose test in order to focus on the real driver of the transaction. After all, that is a theme in other anti-avoidance legislation. 
 I said earlier that I would return to the 12-page letter sent by five eminent City law firms to the Revenue. It highlights several concerns about the definitions of promoters in the clauses and in draft 
 guidance. I wish to put on the record a summary of their concerns. First, because the notification date for notifiable purposes is earlier than that for notifiable arrangements, a scheme may have to be disclosed earlier if a client uses a promoter. As a result, the measure may discourage taxpayers from seeking external advice. 
 There is a potential conflict between client and tax adviser if they take different views on the likelihood of a proposal being a notifiable proposal. If a tax adviser made a protective disclosure when uncertain of whether a proposal was notifiable, it could be detrimental to a client's position in subsequent litigation. Separately, such disclosures could also overwhelm the Revenue, as has occurred with the money laundering rules and regulations. 
 The definitions of the relevant date for the promoter could be unfair in a situation in which a promoter is not the initiator of a notifiable arrangement and may not know when the arrangement becomes available for implementation. In some circumstances, a tax adviser may assist a client but never become aware that he is involved in a notifiable proposal or when such a proposal becomes available for implementation. There are difficulties about the definition of promoter where non-tax advisers are involved. The definition of notifiable proposal could give rise to the perverse scenario that A and B enter into a transaction where tax benefit accrues to B and A's tax adviser is the promoter, and it is not clear in the context of law or accountancy partnership who is the promoter. 
 The lawyers also raise the concern that there is a distinct possibility that there will be multiple promoters in the case of one notifiable arrangement. The tests set out in the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2004 may place undue compliance burdens on promoters who may not be aware of an arrangement meeting the relevant description of financial products or may not have the relevant expertise to determine whether it meets the description. The lawyers have identified other issues relating to the definition of tax advantage in the regulations, which they believe is drawn too widely. 
 The letter goes in some detail into the formula used in the arrangement regulations. The formula gives rise to a wide range of concerns, which are explained at some length. The letter also criticises the time limit for notification, which we shall come to later. After pointing out some minor drafting errors, the letter concludes by looking at the transitional provisions for schemes entered into prior to the commencement date. As I understand it, the Government amendments address most of those concerns. 
 We and the lawyers are concerned that in a number of places the provisions have to be explained or clarified in the Revenue's guidance notes. While that is helpful on the surface, it is not right that compliance with an important regime, which includes fines, can depend on guidance, which will start to have the tenor of tertiary legislation. Surely the regulations should be sufficient on their own.

John Burnett: It is surely not acceptable to be taxed by Inland Revenue fiat. The hon. Gentleman and I have discussed these matters in the past. Guidance notes are not the law. It is as simple as that. We are here to pass the law. We must pass clear laws, and it must be apparent what those laws are. If the Revenue has an interpretation, that is a matter for it. In the final eventuality, it is for the courts to decide on the basis of the laws that we pass in this House.

Howard Flight: I thank my hon. Friend for his robust and sharp summary of the point that I was making. I agree with him wholly.
 I have been almost overwhelmed with comment and advice from outside parties, as I am sure has the Minister. While the clauses seem to have been set out rationally, the key issues seem to be who has to disclose, how they disclose, when they should disclose and what they should disclose. Those key points appear in various clauses: ''who'' is in clauses 291 and 298; ''how'' is partly in this clause, but a little strays over into clause 292; ''when'' appears in clauses 292 and 293; and ''what'' is again in this clause and in clause 291. Those are the key issues to be addressed. 
 We shall come to other issues of concern. The starting point is vague, whether it is five days or longer; there is a potential problem for barristers where the Bar Council rules that they cannot comply; and, as I touched on earlier, the net effect could be that people do not take professional tax advice, which is probably undesirable for both the Revenue and clients. 
 I am particularly concerned that the reporting requirements should not throw sand in the commercial mechanics of takeovers. The objection of everybody—including the Government—to the general anti-avoidance regulations regime that had the same effect in Canada was that if there had to be clearance for every commercial transaction, it slowed down commerce dramatically. 
 In a typical takeover situation, the deal is worked out initially in terms of commercial reality and financial engineering, and it then goes to the tax advisers to be structured in the most tax-efficient way, which is totally reasonable. As I understand it—I hope that the Paymaster General can persuade me to the contrary—deal by deal, the advice given in those situations falls within the parameters of the regulations and what has to be reported. Although in practice people may simply go ahead, make the report, wait for their number, feed it to everybody and do goodness knows what else, the less lack of certainty the better for normal commercial health. I would be delighted if she could give us some comfort and tell us that such a situation is not intended to be covered by these clauses and in particular by the regulations. 
 We saw this practice last year with schedules 21 and 22 on employment-related equity, and previously with the law and regulations pertaining to money laundering. There is a growing trend to draft legislation incredibly widely to catch everything and then to say, ''Oh, we don't really mean that—we'll narrow it down by regulations and guidance to what we're really after, but the law has been drafted that 
 widely so that we have a big stick to hit people with if we think they're being naughty boys.'' That is a most unacceptable form of law because it leaves innocent people in a position of great uncertainty. The trend should be reversed. If we continue in the same direction, we will end up with many of the legal failings of continental Europe, where law—particularly tax law—becomes political and unclear. It would have been wiser of the Government, for starters, to introduce much simpler legislation that focused specifically on schemes that were being marketed. 
 I want to make a personal comment. Over the past four or five years, a number of businesses have asked me whether I think that they should use this or that scheme. I have said, ''No—this is clearly silly, clever-cuts stuff and the Revenue will ensure that it is outlawed pretty quickly.'' They have come back two or three years later and said, ''Howard, why did you give us that advice? We find that everyone else has been using these marketed schemes.'' What has the Revenue been doing that everybody, everywhere, knows about many of the marketed schemes? They are not secret. Many businesses have discussed them with the Revenue, so we cannot put the situation down to ignorance. I question why the Revenue has not been more on its toes and tackled many of the schemes. Admittedly, that would have involved the problem of more anti-avoidance legislation, which is a nightmare, as we all know. 
 There is the matter of efficacy, too. The objective is that the Revenue should at least be much more quickly aware of what is being marketed. That is sensible. However, there will still be the issue of how effectively the Revenue and the Treasury deal with it. Perhaps the Government hope that reporting will be a deterrent, but given the US experience, that is a fairly grey area, particularly if we end up with all manner of things being reported because the requirements are drawn so broadly. That will overwhelm the Revenue and potentially make its task of getting on top of nuisance schemes that should be outlawed pretty quickly by law rather than Revenue diktat all the more difficult. The regulations that the clause unveils are much too wide, as are the related clauses. I look forward to the Minister giving us some comfort that her amendments and the discussions about the regulations will hone the territory into something more manageable and effective.

John Burnett: I do not want to repeat what the hon. Gentleman said because I entirely agree with him. I return to the point that we discussed in the changes to inheritance tax about criminalising the innocent. We seek clear, unambiguous laws passed by this House, not interpretations that could be made by officials or Ministers.
 I would be the first to pay tribute to the Revenue. It has a fair culture that I have admired for many years, and it is a superb service. I hope that any merger between the Revenue and Customs preserves the equity, confidentiality and fairness that the Revenue has for centuries provided to taxpayers in this country. Its lack of prejudice is to a large extent the best in the 
 world. It treats taxpayers fairly and deals with compliance mercifully and reasonably. 
 I wish to précis what the hon. Gentleman said. There are three things that I would like to know. Who has to make disclosure; by what legislation is that understood; and why should those persons make disclosure and what should they disclose? The Revenue wants to obey the law. It is not a corrupt institution. There is the odd bad apple, but they do not arise very frequently. The Revenue, as well as taxpayers, must know where it stands, and it is for us in Parliament and no one else to say where it stands. 
 A fundamental principle of British tax law is that people can organise their tax affairs to mitigate or even obliterate their tax liability. One does not have to volunteer to pay the most tax on any transaction.

Dawn Primarolo: Does the hon. Gentleman accept that the clauses are not about making people pay the most tax even though they are not liable, but ensuring that they pay the tax that the law of the land says they should? If there is any unacceptable behaviour to discuss in the 12 clauses, it is from those who know that they have a tax liability and seek to extinguish it in ways that they choose to keep secret from the Revenue, sometimes with less than candid returns. That is what the clauses are about.

John Burnett: That is an extremely helpful intervention from the Paymaster General. I thought that I might tease her out, and she has been helpful. Many people will concentrate hard on what she has said. As I said, one does not have to volunteer in any transaction to pay the most tax. At its simplest, the high street solicitor will advise—
Dawn Primarolo rose—

John Burnett: Of course I give way. I cannot resist and the Paymaster General knows that. I am just a pawn, or putty, in her hands.

Dawn Primarolo: Whatever. I, and, I am sure, the Committee, would be grateful if the hon. Gentleman elaborated his point by reference to the Bill. Will he refer his point to the clause that deals with the avoidance with regard to gilt strips and explain on what basis that was considered to be acceptable behaviour?

John Burnett: I understand what the Paymaster General is saying. She is nodding her head. There are schemes of an artificiality and an ambiguity that have a history. She and I debated that history when talking about bonuses in gold bullion and so on. Those bonuses were legal and entirely proper until the anti-avoidance legislation was passed. We are in difficult territory. I concede that. However, I reiterate the principle that people can organise their tax affairs so as to mitigate the burden of taxation.
 Members of Parliament enjoy many privileges. One of those privileges is a generous London allowance, which means that many Members have two dwellings. It is up to Members to elect—within the two-year time limit—which of those two dwellings is to be considered their principal private residence. They will presumably do so on sound grounds. What is uncertain for many tax advisers and clients, if the latter are aware of it, is 
 to what extent they can organise their affairs so as to mitigate their tax liability. It is a difficult area. 
 The Paymaster General talked about gilt stripping. I referred her to discussions that we had years ago about bonuses paid in gold bullion that thus escaped national insurance contributions. If the law on those gold bullion bonuses stated clearly that, if bonuses were paid in that fashion, they were not liable to national insurance contributions, it was entirely lawful for the taxpayer to do that. There might be an element of artificiality—we would all concede that—but that is where we hit the horns of the dilemma. I would be grateful if the Paymaster General referred to the gold bullion scheme and told the Committee her views on such a scheme in the light of the legislation before us.

Dawn Primarolo: I can answer the hon. Gentleman's question immediately. If the legislation had been in operation, the scheme would have been closed before it became operational and the Inland Revenue would have been aware of it and known what to do much faster. Other taxpayers would not have been open to the loss of revenue that they had to make good because of the avoidance scheme.

John Burnett: I have one question to ask the Paymaster General. Why? I am happy to take another intervention. The law of that time was the law. In that bullion scheme, national insurance contributions were to be escaped. If someone is using the law as it stands, why should the Government not comply with the principle that it is open to anyone so to organise their affairs as to mitigate the amount of tax payable?

Rob Marris: Let me point out to the hon. Gentleman, who I think is a lawyer, that the word that he has used at least twice today is well established law. ''Artificiality'' is the word to focus on. He will remember the Ramsay case from about 1988, heard by the Judicial Committee of the other place, which focused on the question of a series of transactions, the hallmark of which was artificiality. Any such schema would not be affected for tax-mitigation purposes. Therefore, in theory, it has been fairly settled law for 15 years or more. However, to set it in concrete in practice is much more difficult, and that is partly what the Bill seeks to do.

John Burnett: I am grateful for that intervention. There was a series of cases. As the hon. Gentleman rightly says, Ramsay was a leading case, but Ramsay is rather more complex, as I am sure he would concede. It was followed by another case—it usually comes to mind smartly, but it is not doing so at the moment, for which I apologise—which effectively said that, if a step were imposed in a tax-avoidance transaction with no commercial reality, it could be struck out. Perhaps someone can remind me of that case.

Howard Flight: The Paymaster General merely referred to the reporting of the gold bullion schemes, not to them being illegal. In other words, the issue raised by the hon. Gentleman's question is at the heart of the problem: as long as such schemes are within the law,
 they will be within the law until the law changes. As he knows, that is the legal situation.
 The issue is what to report and what not to report. It is pretty clear that such marketed schemes are good examples of schemes that should be reported. The problem is what other tax-avoidance structuring needs to be reported that is not a marketed scheme.

John Burnett: The hon. Gentleman's point is the same as that of the hon. Member for Wolverhampton, South-West—artificiality.

Dawn Primarolo: That is not the point. Perhaps I can help the hon. Gentleman. If I have understood what he has said, the argument that he appears to be advancing cannot be the case. His argument is that anything is fair game as long as there is no specific, detailed legislation against it. I think that what I, my hon. Friend the Member for Wolverhampton, South-West and the hon. Member for Arundel and South Downs have been saying is ''No, that cannot be the case'', and disclosure seeks to deal with that.

John Burnett: That is a rather unsubtle interpretation. I am trying to tease out from the Paymaster General exactly what she is trying to hit.

Rob Marris: Tax avoidance.

John Burnett: Hang on a minute. The hon. Member for Wolverhampton, South-West says that the Paymaster General is trying to hit tax avoidance. That is not fair, because much tax avoidance—

John McWilliam: Order. Hon. Members should avoid sedentary interventions, because they are not that helpful, besides which I have been listening carefully and the Paymaster General has not made a speech yet.

John Burnett: Thank you, Mr. McWilliam, but she has made some important interventions and I am delighted to have them.
 The point that I am trying to make, which I think the hon. Member for Arundel and South Downs has made too, is that tax avoidance is not to be denied. It is the principle that one can use the tax system to organise one's affairs to mitigate the amount of tax that one has to pay. I have remembered the case. It was Furniss and Dawson. 
 I have some sympathy with the Paymaster General about the artificial schemes, and certainly the bullion scheme. I am not saying that there should necessarily be a free-for-all on such highly artificial schemes. Promoters are a narrow group of individuals who are promoting and marketing artificial schemes, and there is scope and reason to impose on them where they fall foul, for example, of the Furniss and Dawson rule or the Ramsay rule, where there is an interposition in a transaction of an entirely uncommercial stage purely for tax avoidance. The Inland Revenue should not always be laggards, and I see the necessity for the proposals. 
 It is difficult for us to pass legislation that deals with such matters, but it is important that, when doing so, we deal with them in Bills and in regulations that are passed through this House. Taxpayers and their advisers must know exactly what is being proposed. We seek clarity this afternoon, both from the 
 Paymaster General and from the laws of this country. I look forward to hearing from her who has to make the disclosure, why the disclosure has to be made, and what should be disclosed. 
 Finally, there is the importance of professional privilege, particularly legal professional privilege. Lawyers, barristers and solicitors should know exactly where they stand. If that doctrine is to be eroded, we must have an opportunity to debate that, and to stand up for this country's ordinary taxpayers, so that they themselves, and their advisers, know if and when they are in jeopardy.

Rob Marris: Following that interesting speech from the hon. Member for Torridge and West Devon (Mr. Burnett), it seems to me that we are ranging a bit widely here, Mr. McWilliam, and perhaps you will guide me if I go wrong.

John McWilliam: Order. Wide? We have just had most of the Second Reading speech.

Rob Marris: The hon. Gentleman asked three questions. Who has to make disclosure? It says in clause 292 that it is the promoter. Why does it have to be made? So that the Inland Revenue can look at the artificiality, or otherwise, of the scheme. What should be disclosed? That is in clause 290, which tells us about notifiable arrangements and notifiable proposals.

John Burnett: The hon. Gentleman has drawn the Committee's attention to those provisions. Is he entirely clear, having scrutinised them, about the exact extent of disclosure, exactly who is in jeopardy, who should disclose and what should be disclosed?

Rob Marris: The hon. Gentleman asks me the questions that he asked in his speech. He asked for certainty, reiterating that matters should be in legislation, and referring to Acts of Parliament and regulations. That is precisely what we have in front of us: a Bill, a draft Act of Parliament, which, in subsection (1)(a), refers to regulations that will be made. There will, therefore, be the legislative certainty he seeks. In clause 290 and the following clauses, it is fairly clear—with respect to him, either he overlooks the point or I misunderstand part 7—that the legislation is about disclosing to the Inland Revenue. It is not per se about the tax bill that may or may not fall upon the taxpayer. It is simply about disclosure.

John Burnett: Does the hon. Gentleman believe that there should be a blanket trawl available to the Inland Revenue of every scheme and every arrangement? Does he believe that, in the normal course of a client's affairs, their affairs should be kept confidential and privileged?

Rob Marris: I do not think that there should be a blanket trawl and, from the way I read part 7, nor do the Government. If the Bill goes through both Houses of Parliament, clauses will become sections of an Act, providing certainty that, with the amendments that are likely to be made, they will not provide for a blanket trawl.
 Legal professional privilege, or confidentiality of communication as it is known in Scotland, has been a concern of the Law Society of England and Wales, of which I am a member, and it is covered by clause 298.

John McWilliam: Order. I was just about to make that point. Although I suggest that we take the amendments broadly because they are inter-related, clause 298 is quite specific and narrow. It will not be in order to repeat arguments about clause 290 in any subsequent clauses if those arguments have been adequately advanced.

Dawn Primarolo: I will not venture down the route of discussing legal privilege, which, as my hon. Friend the Member for Wolverhampton, South-West stated, is dealt with in clause 298. It demonstrates that legal privilege is protected. If the hon. Member for Torridge and West Devon wishes to return to the matter when we discuss the clause, he can. Rule 702 of the Bar Council rules, which provides for confidentiality of barristers' papers, is also dealt with, but it is subject to the demands of the law and it would not prevent disclosure. My hon. Friend has drawn that out as well.
 We have ranged over a considerable amount of the material covered in all 12 clauses. I will do my best to respond to the amendments and clause 290, although in fairness to hon. Members, if I am able to dispose of their points quickly, I will do. 
 It is not the intention of the disclosure rules to stop accountants advising their clients on the tax breaks and the concessions that Parliament has introduced. That is entirely acceptable tax planning. Frankly, however, there is a world of difference between that and advisers designing outrageous schemes with the deliberate aim of exploiting tax loopholes that are plainly contrary to what the legislation seeks to achieve. I am grateful to the hon. Member for Arundel and South Downs for touching on that point several times. He seeks clarification on how the Government will try, through the disclosure clauses, to achieve that desirable end. 
 I find it unbelievably strange that the tax planning industry knows no bounds when it comes to the complexity, understanding and exploitation of the meaning of words, conveying different meaning in order to deliver a tax relief that was not intended, or a tax rebate for tax that was never paid, yet it apparently struggles to come to terms with the Government's proposals on disclosure. 
 Let us be clear. Disclosure will not of itself affect the tax treatment for a particular transaction. Nor will the fact that a scheme falls within the new rules invite any judgment about the nature of the scheme. That is made clear by Government amendments to clause 290 and to clause 295. 
 I come to the point that the hon. Member for Arundel and South Downs made about legitimate commercial activity, which was reinforced by the example he gave of people seeking his advice, as he is knowledgeable in that area. He referred politely to dubious schemes. The 100 Group of Finance Directors said in its response to the new rules: 
''We have no quarrel with the policy objective to detect and deter the use of 'tax abusive' schemes in order to protect the Exchequer''.
 The Exchequer is every citizen in this country. It is the money collected from the citizens of this country in 
 order to fund the many tasks that they expect the Government of the day to deal with. 
 The heart of the issue is the question of abusive schemes. The tax-avoidance market thrives on secrecy. When occasionally the Inland Revenue gets to see such schemes—someone may send the information anonymously, or whatever—often the condition at the top is that it must not be disclosed to anyone because the Revenue must not find out. The promoters do not want the Revenue to know about a scheme at least until they have finished marketing it. I put a simple proposition to the Committee. If the promoters were not up to mischief, why would they fear transparency and disclosure? Either they are conducting legitimate business or they are not.

Richard Bacon: The right hon. Lady makes an interesting point, which perhaps I may put back to her. She asks what the promoters have to fear from transparency. It may be slightly wide of the clause, but what does the Treasury have to fear from transparency in the disclosure of the financial models in private finance initiative bond transactions? Currently, they are not being disclosed, but they used to be.

John McWilliam: Order. That is wide.

Dawn Primarolo: This is a serious discussion about the loss of huge amounts of revenue to the Exchequer, which is in the interests of every citizen in the country. If the hon. Member for South Norfolk (Mr. Bacon) wants to raise wider issues about the Government, he has every opportunity to do so.

Rob Marris: Does my hon. Friend agree that in certain circumstances certain taxpayers might be saved money by the provisions? They could find out early on from the Inland Revenue that what they hoped was a nice tax wheeze was never going to work and they could save having to pay a fat fee to the promoter.

Dawn Primarolo: Indeed, that may be the case, but it is rather further down the line. On Second Reading, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), who sits on the Conservative Benches, made an excellent speech about corporate responsibility and tax planning. He argued strongly, and I agreed in many respects, that the few tax planners and promoters who design such schemes know exactly what they are doing, how they are going to do it and the consequences for the Exchequer. He made a moral argument, but I am not going to go down that route. The Government are seeking to take the issue forward through disclosure.

Howard Flight: Perhaps the Paymaster General is coming to the fundamental point that within the spectrum of what we would call avoidance we broadly all perceive that there are bogus-type schemes that get marketed, and that there is accepted tax planning consultation and structuring with which the Revenue is familiar. The problem is the dividing line between the two. It seems to me that marketing is a key practical dividing line. The whole activity of thinking up clever-cuts schemes and marketing them is what is being sought. However, the clauses, and in particular
 clause 290 on the regulations, do not use that as the dividing line, and that has led to concerns about a lack of clarity on reporting and concerns about people not knowing where they stand.

Dawn Primarolo: With respect, I will come to that. However, I will say that some of the schemes are designed for specific use by a client, and they produce hundreds of millions of pounds of savings on the tax that is liable. Therefore, they deny the Exchequer the money to which it should have been entitled.
 I agree with the hon. Gentleman that this goes to the heart of why disclosure is the way forward. He has spoken about it before, as I have, in various debates. The dividing line between acceptable tax planning and unacceptable tax avoidance is very difficult to draw with precision. Therefore, the Government are approaching the matter on the basis that the disclosure rules are designed to reflect that. They will operate entirely in a non-judgmental way and they are aimed at those types of transactions where, in the Inland Revenue's experience, there is a risk of unacceptably high avoidance.

John Burnett: Unacceptably what?

Dawn Primarolo: Unacceptably high. I am talking about where the risk is highest for likely avoidance.

John Burnett: I simply do not understand that point—it must be a matter of principle, and it is not a matter of the extent of the taxation.

Dawn Primarolo: The hon. Gentleman cannot have it both ways: he cannot complain that somehow this is a trawl across the entire tax system and yet object to the fact that the Government are targeting it on two specific areas—employment and financial projects—and then through the regulations are putting in a series of filters to get us towards precisely what the offending proposals may or may not be.
 The hon. Gentleman has only to examine this Finance Bill, let alone the others with which he has been involved since 1987, to see the huge challenge that is posed by dealing with this matter. I think that I am right in saying that there have been 50 major anti-avoidance measures within Finance Bills since 1997. He just has to examine this Finance Bill to see what the Government are having to do to keep up with this matter. As he rightly said, that is no way to proceed in Government, and instead of closing the door after the horse has bolted we need to take suitable measures. I hope that the existence of disclosure will deter some elements, although I am depressed to hear from my Revenue official that there are those who are already seeking to get round the rules. Unfortunately, that is the current position. 
 The two Government amendments correct a potential misunderstanding about the way in which the disclosure rules will operate in practice. When the Board of Inland Revenue allocates a reference number to a scheme or arrangement disclosed to it, it is not in any way expressing a judgment on whether the scheme is legally effective in achieving a tax advantage. The reference number is a purely administrative matter. If it stops some tax planners in their tracks, good. It may have a deterrent effect, but it will not represent a judgment. 
 Clauses 290 and 295 might be taken to imply that the Inland Revenue is making such a judgment. Such uncertainty is not intended. If the clauses are not amended, they will create uncertainty about which schemes need to be disclosed—the very points that hon. Gentlemen are making—and, as the hon. Member for Arundel and South Downs rightly said, that could prejudice any future litigation by the Revenue to challenge the scheme in the courts. It is therefore important to correct any potential misunderstanding by means of Government amendments. 
 The two amendments resolve any uncertainty about the issue. The first clarifies the definition of a notifiable arrangement as one that might be expected to produce a tax advantage, rather than one that does produce such an advantage. It removes the implication that a qualifying arrangement needs to generate a tax advantage successfully in law. 
 The second amendment makes it explicit that the number allocated by the Inland Revenue to a scheme or arrangement should not be regarded as a judgment that that scheme or arrangement successfully generates a tax advantage. Taken together, the two amendments resolve uncertainty, and I commend them to the Committee. 
 The Opposition amendment seeks to replace the main benefit test for notifiable arrangements with a test relying on the purpose of the arrangements. In the context of the rules, which are primarily aimed at scheme promoters, the Government remain firmly of the view that it is preferable to define notifiable arrangements by reference to a main benefit test, which is an objective test that will be easier for promoters to apply, as it measures the likely outcome of the arrangements. A test that depended on the purpose of the arrangements would require, at least in part, knowledge of the intentions of the person who is putting the arrangements in place. It would create difficulty in particular cases, as it might be unclear whether the intention of the promoter, or the intention of the client was the relevant consideration. 
 The second leg of the amendment would restrict the test to requiring that obtaining a tax benefit was the main purpose, rather than one of the purposes, of the notifiable arrangements. That would make the disclosure rules largely ineffective because disclosure would be required only if the Revenue could prove that the tax benefits outweighed any other benefits from the scheme. It would strike down the purpose of disclosure for transparency. If the hon. Member for Arundel and South Downs seeks to press his amendment, I will ask my hon. Friends to oppose it.

John Burnett: Will the Paymaster General give way?

Dawn Primarolo: It might be helpful if the hon. Gentleman bears with me a little, because I wish to address some important issues around regulation, promoters and points that he and the hon. Member for Arundel and South Downs have made.
 This group of clauses provides for disclosure of schemes and arrangements that have as a main benefit the obtaining of a tax advantage. The test is narrowed by further conditions that focus on whether the 
 arrangements are a financial product or an employment product. The conditions are set out in regulations. The clauses define promoters as including anyone who is directly involved in the design and marketing of schemes and arrangements within the criteria for disclosure. The Revenue will allocate a reference number to these schemes and arrangements. Promoters will be required to notify clients of that reference number and taxpayers will have to enter that number on their tax returns. 
 I turn to the issue of regulations acting as the additional filters when the clause has set the scope. In response to the Finance Bill, the Chartered Institute of Taxation said: 
''We have commented in the past on the excessive reliance on statutory instruments for the details of tax law. However, here we can accept that the use of Sis is necessary and appropriate in the circumstances.''
 Three sets of draft regulations have been up for consultation since 17 May. The draft Tax Avoidance Schemes (Information) Regulations set out the procedural rules for disclosure. The draft Tax Avoidance Schemes (Promoter and Prescribed Circumstances) Regulations set out certain circumstances in which a person is not to be regarded as a promoter for the purpose of the disclosure rules. The draft Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations prescribe arrangements that must be notified under the disclosure rules, where the arrangements have as a main benefit the obtaining of a tax advantage. Basically, that addresses the who, wherefore and how that the hon. Members for Arundel and South Downs and for Torridge and West Devon touched on. The closure date for consultation on those regulations is 30 June, so further issues might be submitted in the coming period that the Government will want to take note of. I thought that it would help Committee members if I mentioned that so that they can see what our intentions are when we discuss subsequent clauses. 
 Extensive consultations on the new disclosure regime have been taking place since the Bill was published, and so far three key issues have emerged, which we propose to address through changes to the legislation. Although the consultation period has not finished yet, I want to say where we have now reached. 
 The first of the three key issues that concern us is the definition of promoter; the hon. Member for Arundel and South Downs mentioned that. That and the second issue, which is the definition of what has to be disclosed, may be too wide. The third issue is a concern that the 1 August operative date will be impossible to meet. 
 On the definition of promoter, the Government want to ensure that the rules strike the right balance as to the range of people who are required to report. Clause 291 is drafted very widely to bring those involved in providing tax services within the scope of the regime. It also provides vires to narrow the range of people required to report by prescribing in regulations the circumstances in which a person is not to be treated as a promoter. 
 Let me respond to the point made by the hon. Member for Arundel and South Downs. When we publish revised regulations, we shall exclude from the definition of promoter anyone not involved in those parts of the scheme that give rise to a tax advantage—for example, someone dealing only with the company law aspects of a scheme—and most people responsible for the organisation or management of the arrangements, unless connected with the designer of the arrangements. These changes will ensure that only those who are at the heart of a scheme or arrangement, and are capable of meeting the obligations, are treated as promoters.

Harry Cohen: I support the proposals overall, but has the Paymaster General satisfied herself in her own mind that there is a distinction between a promoter developing these schemes and those who are developing these schemes in-house for a very big corporation? I am thinking of the example of the Murdoch press, which in my opinion does not pay its fair share of tax. Such a corporation will have a whole army of promoters, but they will probably be in-house developers of tax avoidance schemes. Will they be captured by these clauses?

Dawn Primarolo: I can assure my hon. Friend that the clauses provide for disclosure under those circumstances, and identify, in a subsequent clause that we will come on to discuss, exactly what in-house promoters, as he called them, whether at the company or a connected company, will be required to do.

Howard Flight: It may be difficult, but I would be grateful if the Paymaster General could answer the following question for me, as I still do not know the answer. Let us imagine that whoever is now bidding for Marks and Spencer succeeds in winning the bid. Naturally, as they put together the transaction for taking over the business, they would go to their accountants and lawyers and get advice as to how to structure that in the most tax-efficient way. Anyone who runs a self-employed business and is coming up to retirement will naturally go to their accountant, and potentially their lawyer, and ask, ''What is the most efficient way I can sell this business?'' I do not believe either of those activities should fall within what the Government are after, but there seems to be no clarity as to whether they would or would not.

Dawn Primarolo: It would be helpful if I moved on to explain to the hon. Gentleman the definitions of what has to be disclosed, as that will address the pertinent point he is putting to me.
 There is a series of filters in the regulations that narrows down the kind of arrangements that have to be disclosed. They come down to the two ultimate tests, focusing on employment products and financial products respectively, as set out in the draft regulations. The Government believe that the employment products test meets its objective and, apart from some minor technical refinements, expect it to remain as it is. The consultation has confirmed that view. However, and I think this addresses the hon. Gentleman's point, we recognise that the financial 
 products test as drafted is, frankly, proving difficult to apply in practice.

John Burnett: Difficult to what?

Dawn Primarolo: Difficult to apply in practice, was what I said. When we publish revised regulations, we shall drop the formula requiring promoters to calculate the value of the tax benefit versus the difference between the economic benefit and the cost of the arrangements.

John Burnett: I will deal with the facile interventions made by the hon. Member for Wolverhampton, South-West later. The Paymaster General has kindly dwelt at some length on the points I asked her about, and about which the primary legislation is immensely nebulous, although I shall leave that to one side.
 The Paymaster General talked earlier about wanting to catch transactions where the tax benefit outweighed other benefits, or where that was not a relevant consideration. Surely she will agree that other benefits could be commercial, and if those commercial benefits were such that they were of paramount importance, it would be incumbent on individuals in company law to proceed on that basis.

Dawn Primarolo: With regard to the revised regulations, it may help if I tell the hon. Gentleman what the next point is. I am sure that he is not going to dispute with me that the concept of main benefit is widely used in existing tax legislation, so it is hardly unfamiliar to advisers. The second point concerned putting in place new filters that focus on factors identified with the innovative use of sophisticated financial products to gain a tax advantage that could be sold at a premium, as contrasted with the routine use of financial products that an adviser in the relevant tax field might be expected to put forward.
 That deals with the point raised by the hon. Member for Arundel and South Downs about not interfering with the proper advice that might be given to a client who was seeking that advice, and including a list of financial products to which disclosure does not apply. ISAs and finance leasing will be on that list. Those changes will ensure that disclosures are required only in respect of financial product-based arrangements that pose the greatest potential risk to the Exchequer. As I said, the closing date for consultation on the regulations is 30 June, so I should not wish to mislead the Committee, or anyone still wishing to make submissions, that the Government will not listen sympathetically to any further points that are made. 
 The other point that the hon. Gentleman raised concerned the operative date of 1 August. I do not propose to change the planned date for the disclosure regime. However, in recognition of the fact that promoters will have little time to put appropriate systems in place and train staff between the finalisation of the rules and the start date, we shall make the following changes to the commencement rules and regulations. 
 Where the relevant date for disclosure falls on or after 1 August, the time limit for making the disclosure will be 30 September 2004, or five days, whichever is later. There has been no evidence of arrangements 
 involving financial products being actively marketed since Budget day. In view of that and the changes that we shall be making to the draft regulations, and to demonstrate how fair the Government will be with regard to the disclosure rules, there will no longer be a requirement to disclose arrangements from 18 March or 23 April 2004, as is currently set out in clause 302. Instead, promoters will be required only to disclose arrangements involving financial products where the relevant date falls on or after today. Promoters will be given until the 31 October 2004 to make the disclosure in respect of the financial product arrangement with the relevant date falling on or between 22 June 2004 and 31 July 2004. 
 However, there is evidence that arrangements involving employment products have been actively marketed, so I am not proposing any changes to the requirements in clause 302 for those to be disclosed where the relevant date falls on or after 18 March or 23 April 2004, as appropriate. Regulations will allow promoters until 31 October 2004 to make disclosures in respect of employment products where the relevant date falls on or before 31 July 2004. Those changes will therefore give promoters sufficient time to make the transition without compromising the objectives of the new scheme. 
 I am extremely grateful, Mr. McWilliam, for your tolerance in allowing me to respond on clause 290 to the detailed points made by the hon. Members for Arundel and South Downs and for Torridge and West Devon. I want to indicate the Government's intention on a number of other issues, but I am keen to ensure that the Committee is clear that, in establishing clause 290 and clauses that we have yet to discuss, we will approach the issues in a proportionate, fair and sensible fashion, while still attempting to ensure that we receive disclosure of the abusive schemes that we seek to deter. That will place the Government in a sensible position in which to take decisions on future actions. I commend this clause to the Committee.

John McWilliam: It may be for the convenience of the Committee if I give some indication of my intentions for the rest of the evening. There will be at least one Division in the House at 5 o'clock and perhaps two, but in any event I propose to suspend the sitting from 5 until 5.30 to enable hon. Members to have a bit of a break. We shall return at 5.30 and crack on with consideration of the Bill.

Howard Flight: I thank the Paymaster General for her valuable description of some important refinements and changes that will be made to the regulations, which will answer a number of issues. There is one issue that I did not mention earlier, but the hon. Member for Torridge and West Devon touched on it and I would like to comment on it in the light of my experience over 30 years of a good relationship with the Inland Revenue and of discussing issues and solving problems in a practical manner. I am a little rusty now, because I have been here for seven years. However, one is aware that, since then, quite a lot of things have crept in from north America and other parts of the world that have led to a more aggressive stance. To some extent, the Government have
 contributed to that. I am advised, for example, that many bogus swap deals creating artificial losses were entered into by oil companies, which were annoyed and offended at the extra 10 per cent. tax limit on them, for which they felt there was no consent. Taxation is ultimately about consent; it is not just about Governments with large majorities. I hope that we will return to the constructive relationship with the Revenue that has been a hallmark and a great advantage of this country, rather than the aggressive ''you fight, we fight'' situation that we have been moving towards.
 I will not press my amendment to a vote, but there is still a long way to go to sort out what will and will not be reportable. Although we still think that the word ''purpose'' is ultimately better and it follows the US model, there is a question as to the difference between benefit and purpose. However, much progress has been achieved this afternoon.

John Burnett: I, too, am grateful to the Paymaster General. I would just like to leave her with a couple of points to consider. This relates to fairness for the taxpayer. Will the Inland Revenue publish its anonymised rulings in relation to the schemes? Will those rulings be available to taxpayers as a form of guidance? That would be a considerable help. In addition, the Revenue is quite often well aware of schemes, because they have been used for years. You may well have been aware of them yourself, Mr. McWilliam.
 A simple example is the pref trick. It has not been able to be used for some years now, but it was in common use in corporate takeovers. It involved changing the class of shares from ordinary shares to preference shares and the use of renounceable letters of allotment. Stamp duty on many corporate takeovers was therefore avoided. It was negligent for a law firm not to use that form of tax avoidance. If the Revenue, or at least the stamp duty office, did not know about it, it was grossly negligent itself because it was used over many years. That is just one small example. Are we going to allow the Revenue arbitrarily to change its mind and to decide that a system that it has acquiesced in for years should be reportable when it is not now reportable?

Howard Flight: I thank the hon. Gentleman for raising an important point. The Jones case will be heard before the Inland Revenue Commissioners around 14 June. It is a very bad case of the Revenue wantonly reinterpreting an old provision.

John McWilliam: Order. That is sub judice.

John Burnett: I will avoid any reference to that case. You quite rightly intervened at that point, Mr. McWilliam. Nevertheless, the hon. Member for Arundel and South Downs has made a powerful point, which he grafted on to the point that I made earlier. We cannot allow the Inland Revenue to chop and change. I want to see a system of anonymised reporting, and if the Revenue makes a ruling, we cannot have it chopping and changing in the future. We want a transparent, fair system.
 I return to the points that I made earlier, which are relevant. Who is the promoter, what should they 
 disclose and why should they disclose it? We want to be certain on those matters and it is incumbent on the legislators—the people promoting this Bill: the Government—to make that abundantly and accurately clear so that all taxpayers know where they stand.

Dawn Primarolo: On whether anonymised schemes will be published, I made it clear to the Committee that the disclosure of a scheme and the allocation of a reference number to it—it is not a clearing or ruling system—conveys no status apart from the fact that the scheme has now been disclosed to the Revenue. In order to achieve what the hon. Member for Arundel and South Downs is suggesting in terms of publication, we would have to move to a full ruling system. Discussions and consultations on that, over a considerable time, have shown business and advisers to be against the introduction of a general anti-avoidance regulation. If he wants to advance that as a suggestion, that is entirely a matter for him, but it is not the purpose of the amendments.
 I am grateful to the hon. Members for Arundel and South Downs and for Torridge and West Devon for praising the Revenue. The Revenue is charged with acting on our behalf to be fair to all taxpayers, and it needs to be given the proper tools by Parliament to discharge its duty. That is what these clauses propose. 
 Finally, the hon. Member for Arundel and South Downs made a point about the motivations of those who, in anger, frustration or political disagreement, are driven to use schemes that they know go against the intention of the law, such that they conceal them. I could not possibly comment on that. My experience as a Treasury Minister since 1997 demonstrates, unfortunately, that the advent of tax planning in an aggressive, consistent and systematic assault on the Exchequer is recent, and growing very fast. It is incumbent on any Government to deal with that, and the Government are doing so to try to level the playing field for fair, honest taxpayers. That is what we are seeking to achieve.

Rob Marris: I apologise to the hon. Member for Torridge and West Devon, who called me facile, because I assumed—clearly I was wrong—that he had looked at the draft Tax Avoidance Schemes (Promoters and Prescribed Circumstances) Regulations 2004, the draft Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2004 and the draft Tax Avoidance Schemes (Information) Regulations 2004.

John Burnett: Will the hon. Gentleman give way?

Rob Marris: Let me finish. Those draft regulations were circulated to you, Mr. McWilliam, and Committee members under a covering letter written by the Paymaster General dated 13 May, which was six weeks ago.

John Burnett: Those regulations are not entirely clear. The hon. Gentleman is aware of that. That has been the tenor of the Paymaster General's comments in the past half hour.

Rob Marris: We are debating the draft regulations. The Paymaster General has already said that certain parts will be changed. However, it is clear that the hon. Gentleman has not gone through them.
 Amendment agreed to. 
 Clause 290, as amended, ordered to stand part of the Bill.

Clause 291 - Meaning of ''promoter''

Amendment proposed: No. 555, in 
clause 291, page 241, line 30, leave out from 'of' to end of line 32 and insert 'a relevant business'.—[Dawn Primarolo.]

John McWilliam: With this it will be convenient to discuss the following:
 Amendment No. 569, in 
clause 291, page 241, line 32, leave out from 'taxation' to 'and' in line 36 and insert 
 'if he makes the notifiable proposal available for implementation to five or more persons.'.
 Amendment No. 570, in 
clause 291, page 241, line 38, leave out '(ii)'.
 Government amendment No. 556. 
 Amendment No. 3, in 
clause 291, page 241, line 41, leave out 
 'is to any extent responsible' 
 and insert 'has the primary responsibility'.
 Government amendment No. 557.

Howard Flight: Parties who are involved in the design, organisation or management of arrangements will be caught under clause 291, irrespective of whether they are involved in the tax structuring, because someone else in their organisation provides tax services. Examples would include auditors advising on accounting questions, corporate finance or insolvency specialists involved in transactions, lawyers preparing documents in cases where their own tax specialists are not involved, and trust departments of banks. Equally, providers of tax services would be caught if they were involved in a transaction where a client who was unknown to them was seeking to secure a tax advantage.
 The definition of promoter should be restricted to parties who are providing tax structures or tax services in relation to the notification arrangements or proposals in question. There are two amendments on that: Nos. 569 and 570. Amendment No. 3 would not answer fully all the points that I have just made, but it would remove secondary parties from the frame. The existing wording makes any adviser who is involved to any extent liable to report the arrangements to the Inland Revenue, thereby imposing a disproportionate obligation on advisers who are not primarily involved in marketing. In defining the promoter as the person with primary responsibility for the arrangements, amendment No. 3 targets the obligation for reporting in a more focused way on the person who is marketing the scheme. 
 Going back to the more fundamental point that I made earlier, amendments Nos. 569 and 570 would 
 limit the definition of promoter to situations in which schemes are being marketed. Surely the new direct tax disclosure regime aims to focus on pre-packaged, mass-marketed tax planning schemes. In our view, it would be wiser to start with measures that we believe are likely to catch 75 to 80 per cent. of what is being sought and to make them work, rather than having arrangements that might not work because they are trying to bite off too much in one fell swoop. 
 The general aim of the disclosure regime is that, other than with marketed schemes, the concept of disclosure is not an issue with the vast majority of advisers, taxpayers and auditors. In introducing the new disclosure requirement, however, it would be wiser to focus on the sort of pre-packaged schemes that have caused concern in recent years. Those are the schemes that the authorities really want to know about. As drafted, the rules encompass a vast regime of tax planning activities, particularly the great deal of advice that flows from the usual client-adviser relationships pertaining to everyday transactions. I fear that that will give rise to a huge administrative burden on business, on the profession and on the Revenue. 
 As an aside, I am sure that the Government have considered the US experience in this regard, and I hope that the Paymaster General will be able to comfort me that I have less reason to worry that the Revenue will be snowed under than I fear. As I said, the amendment would limit the disclosure requirements to proposals that have been made available to several persons. The figure of five or more has been chosen as a minimum number to give an indication of real marketing activities. If we are to focus on marketing, we can dispense with the trigger of notifiable arrangements, which becomes unnecessary. 
 The Minister has said that, at least for now, the Government are not thinking of backing a little towards a key focus on marketing schemes, which we believe would be a very positive step towards making these arrangements work. I hope, however, that she will want to accept my amendment so that some comfort may be given by limiting the number of people who will be caught by the requirements under the clause.

Dawn Primarolo: The disclosure rules are designed to apply to all promoters who, in the course of a trade, profession or business, have responsibility for the design and organisation of a notifiable scheme or arrangement. That includes accountants, tax advisers, solicitors, lawyers, barristers and financial institutions such as banks. The definition of promoter is set out in the clause, which restricts it to someone
''in the course of a trade, profession or business which involves the provision to other persons of services relating to taxation''.
 That seems perfectly reasonable, but representatives of the accountancy and banking professions have pointed out that defining a promoter in that way might inadvertently exclude banks from any requirement to disclose in a way that we do not intend, because of the particular way in which banks promote these schemes. It is fairly common for banks to devise and market financial products, with which the hon. Gentleman may be familiar, whose purpose is to generate a tax 
 advantage, without providing their clients with any advice that relates directly to taxation. They could be contributing to the design and modernisation of a scheme, but they are not directly in the business of providing services related to taxation, so there is a risk that they would not be caught by the rules. 
 Banks have a significant involvement in that market, and it would be unfair if the disclosure rules did not apply to them in the same way as they do to other promoters. That is the point that has been made to the Inland Revenue in consultations. The purpose of the Government amendment is to remove any doubt that banks are subject to disclosure rules as other promoters are. It makes it explicit that they are subject to the rules if they have responsibility for the design, organisation or management of a scheme or arrangement, even where they do not directly provide advice relating to taxation. 
 That does not represent a widening of the rules, or a change to the underlying policy. It merely confirms the original intention that the rules should apply to all promoters fairly and equally. It does so by using two definitions of banks from existing tax legislation. On their own, those definitions do not go the whole way towards bringing banking groups into the new regime, but subsection (1)(b) and (c) bring in non-banking companies in a banking group. 
 The Opposition amendments to clause 291 go further than simply clarifying the definition of a promoter. They would narrow that definition in various ways. Amendment Nos. 569 and 570 would reduce the occasions when a promoter must make a disclosure of a scheme that has been designed but not implemented. They would do so by limiting the disclosure requirement to cases where the proposal is made available to five or more persons. 
 I simply cannot accept or support the amendments. They do not reflect the scale of the potential exposure to the Exchequer, because it could involve five or four individuals who have an enormous amount to gain. The amendments also draw a distinction between notifiable arrangements and notifiable proposals. Notifiable arrangements are where arrangements have been entered into and the transaction has taken place, while notifiable proposals are descriptions of arrangements that have not yet taken place and may never do so. 
 The amendments are intended to leave in place the obligation on promoters to disclose all notifiable arrangements but to limit the disclosure for notifiable proposals to schemes that have been widely marketed. I understand the hon. Gentleman's good intentions, but the amendments would unfortunately open up the opportunity for promoters to provide bespoke advice to their clients that would never be disclosed to the Revenue. The exposure of the Exchequer could be enormous, and it is not proportionate. 
 If the amendments were accepted, the bespoke advice would not need to be disclosed as a notifiable proposal. After advising a client to use a scheme, the adviser would step back and ensure that he or she did not know whether the scheme was entered into. That 
 way, there would never be a relevant date when the promoter needed to make a disclosure, and it could be arranged so that no one else needed to disclose either. They would simply sidestep all the rules. 
 I hope that hon. Members do not think that I am being cynical, but such is the ingenuity of those who seek to get around the rules that it would be foolish for us to accept amendments that provide ways around the rules that we are already able to understand. It would undermine our legislation and create a significant defect in the disclosure rules that would be exploited by those who are determined to continue to do so. For that reason alone, I must resist the amendment. 
 Amendment No. 3 would narrow the definition of a promoter to any person who has primary responsibility for the design, organisation or management of the notifiable arrangements. It would do so in respect of notifiable arrangements, but not in respect of those who design them or those who make arrangements available for their implementation. That may be what the Opposition seek to achieve—I do not actually think so—but it is difficult to understand the purpose of such a distinction; it would almost certainly create confusion in practice. If that is not what was intended, the amendment is defective. 
 The amendment would introduce the subjective concept of a person who has primary responsibility for the design, organisation or management of notifiable arrangements. It would make compliance more difficult for the majority of scheme promoters who want to comply with the disclosure rules. People have been telling us that they think the Government's proposal is good way forward and that we should make it work. If the amendment were accepted, it would not be clear in many cases who has primary responsibility, and restricting the definition of promoter in this way would offer a potential escape route to those who are looking for ways to continue to avoid disclosing. Therefore, I cannot accept amendment No. 3, either. 
 The hon. Member for Arundel and South Downs referred again to the information that will be coming to the Revenue. Each of the clauses sets the scope and, if there are regulations, provides the filters. I am satisfied that the Revenue's advice at this stage indicates that the filters should produce the disclosures that we seek and that they are proportionate to the challenge that we face, which can be dealt with competently and efficiently by the Revenue. If he presses his amendments to a vote, I will ask my hon. Friends to support the Government's amendments but to oppose those of the Opposition.

Howard Flight: What the Paymaster General said in her latter comments goes to the heart of the issue, which is whether the narrowing down from what is in the clauses via the regulations focuses on what is wanted. I accept that amendment No. 3, which was tabled very early, is inadequate by itself, but the purpose of the amendments was to focus on the key territory and to seek to avoid reporting that is far too wide. Time will tell, but I urge the Government to be practical in their
 use of regulations and to cut them down to achieve what I believe everybody knows they are really after.
 Amendment agreed to. 
 Amendments made: No. 556, in 
clause 291, page 241, line 40, leave out from 'of' to 'he' in line 41 and insert 'a relevant business'.
 No. 557, in 
clause 291, page 242, line 2, at end insert— 
 '(1A) In this section ''relevant business'' means any trade, profession or business which— 
 (a) involves the provision to other persons of services relating to taxation, or 
 (b) is carried on by a bank, as defined by section 840A of the Taxes Act, or by a securities house, as defined by section 209A(4) of that Act. 
 (1B) For the purposes of this section anything done by a company is to be taken to be done in the course of a relevant business if it is done for the purposes of a relevant business falling within subsection (1A)(b) carried on by another company which is a member of the same group. 
 (1C) Section 170 of the Taxation of Chargeable Gains Act 1992 has effect for determining for the purposes of subsection (1B) whether two companies are members of the same group, but as if in that section— 
 (a) for each of the references to a 75 per cent subsidiary there were substituted a reference to a 51 per cent subsidiary, and 
 (b) subsection (3)(b) and subsections (6) to (8) were omitted.'.—[Dawn Primarolo.]
 Clause 291, as amended, ordered to stand part of the Bill. 
 Sitting suspended. 
 On resuming—

Clause 292 - Duties of promoter

Howard Flight: I beg to move amendment No. 368, in
clause 292, page 242, line 6, after 'period', insert 
 'of not less than 30 days'.

John McWilliam: With this it will be convenient to discuss the following:
 Government amendments Nos. 558 to 560. 
 Amendment No. 4, in 
clause 292, page 242, line 19, at end insert 
 'and shall, to the extent, that he is aware of the existence of any other person who is a promoter in relation to the same notifiable arrangements, deliver a copy of the prescribed information to such other person in the prescribed manner.'.
 Government amendments Nos. 561, 562 and 564 to 566. 
 Amendment No. 6, in 
clause 297, page 243, line 33, leave out from 'promoter' to end of line 35.
 Government amendments Nos. 567 and 568. 
 Government new clause 22—Power of Board to specify form and manner in which information is provided under Part 7.

Howard Flight: The clause deals with the duties of a promoter and when and how they are carried out.
 Together with clause 293, which deals with non-UK advisers, it provides an outline of the requirements. The time limit imposed is prescribed in the regulations as five days. We feel that such a limit is tight but manageable for mass-marketed pre-packaged schemes, which should be the main objective. However, the time limit causes concern for advice flowing from the normal adviser-client relationship. In particular, it takes no account of the practicalities of business organisation: the need to confirm details, agree with colleagues, exact interpretation, confirm with clients that something has gone through, and so on. That is assuming that the trigger point can be satisfactorily identified in what is often a continuous flow of discussion and information against a tight time scale imposed by business pressures.
 While requiring disclosure in five days by promoters, the Inland Revenue is allowed 30 days to register the item and return with a number for the scheme. We can understand and accept the Revenue's wish to have a five-day time scale for the notification of schemes of the type that they want to tackle. However, to impose the time limit on general business relationships shows a lack of appreciation of the practicalities of business. A notification period of 30 days is the minimum that would be acceptable and practical for such disclosures. 
 It is difficult to propose an amendment to the Finance Bill because a two-stage approach is needed: notification for the pre-packaged scheme should be within five days, but the notification period for more general advice should be 30 days. That would require a rewriting of clause 292. However, I hope that the Minister will give us some comfort that five days is fine for the pre-packaged product ready to be marketed, but that there they may be leeway for individual cases. 
 Amendment No. 4 is designed to ensure that, if there is more than one promoter, each promoter obliged to make a report keeps other promoters involved so that they know that they are not required to do so. 
 Amendment No. 6 relates to clause 297. The reporting obligation relates to arrangements falling within certain designated categories that the Treasury believes could give rise to tax advantages. There is no requirement on the Treasury, in making such a designation, to show that tax advantages arise from the arrangements. Therefore, it is surely inappropriate for taxpayers to be required to identify the nature and timing of tax advantages. That also creates an unnecessary additional compliance burden. Once the Revenue has been informed of the existence of arrangements, it will be able to determine the tax advantages flowing from them.

Dawn Primarolo: The group of amendments covers several different issues. As the hon. Gentleman explained, amendment No. 368 would allow promoters a minimum period of 30 days to provide the Inland Revenue with the information relating to any notifiable proposal. The detailed rules and several of the practical issues, including this one, are set out in regulations, and I touched on that in the debate on amendments to clause 290.
 The consultation on the draft regulations has not concluded and I do not wish to prejudge its outcome, but I am not aware of any persuasive argument for allowing longer than five days, except in the early days of the new regime, and I have already dealt with that. 
 The promoters will already have the information that the Revenue requires at the time that they sell or market the scheme, so they should be able to comply. They know what the schemes are, and to market them they must know what they are about, so I do not know why five days is considered unreasonable. They can get schemes into operation in less than five days in order to duck under legislation being introduced at the end of the financial year, so they can certainly manage it in the situation under discussion.

Howard Flight: I entirely agree that five days is perfectly practical for schemes being marketed. The issue is the grey territory, where as I mentioned there may be an obligation in takeover or active business situations. In those situations, five days is not practical.

Dawn Primarolo: With respect to the hon. Gentleman, the promoters either know that they are selling a scheme or they do not. They either know the contents of the scheme that they are recommending or they do not. If they know, they should disclose it, and if they do not, they should not be recommending it.
 The hon. Gentleman mentions a grey area. Schemes are amended as they are tried out on the market, and they can be refined as advice is subsequently given. He has not made any case for why the promoter cannot comply with the Revenue within five days but can give speedy advice to clients. The disclosure requires the same compliance. 
 I am not attracted to increasing the time limit to 30 days. It would seriously undermine the effectiveness of the disclosure rules. We are discussing highly sophisticated, specialised and able groups of professionals, and five days is not a hurdle to them.

John Burnett: The Paymaster General has talked about highly professional and able people, but they have a right to know where they stand as well. Have I understood her correctly? Does a proposal becomes notifiable when it is sold or when it is marketed to the public?

Dawn Primarolo: We are not talking about a general anti-avoidance regulation, but about disclosure of information to the Inland Revenue. The promoters will have the information that is required by the Revenue at the time they market or sell the scheme, so they should be able to comply with the five days. I have no intention of going back over my rather long contribution on clause 290, where I specifically set out the issues relating to the regulations.
 No case has been made for 30 days. People would prefer it, but it opens up a window that would make the operation of these rules intolerable.

John Burnett: Will the Paymaster General give way?

Dawn Primarolo: The hon. Member for Arundel and South Downs has moved his amendment. If I can respond to that and his other amendments, the hon. Member for Torridge and West Devon can then make his point and of course I shall come back to him.

John McWilliam: Order. It may assist members of the Committee if I remind them that I said when I was allowing the debate to go particularly wide on clause 290 that that clause encompassed all this group of clauses. I caution the Committee that, if hon. Members, having had the latitude that I have given them, insist on making arguments that have already been made, I shall have to take that into consideration when I make a judgment about tedious repetition.

Dawn Primarolo: I understand that amendment No. 4 addresses the situation where a number of people are promoters of a particular scheme by requiring the promoter who notifies the Revenue to copy that notification to all other promoters. The purpose is to enable those other promoters to be satisfied that their duty to disclose details of those arrangements has been discharged by the notification.
 The amendment does not achieve that purpose, as it applies only to the disclosure of the notifiable arrangement. The Government expect the majority of disclosures to be made in respect of notifiable proposals, which are likely to involve more than one promoter. Therefore, the amendment would not ensure that other promoters knew when the disclosure requirement in respect of the notifiable proposal had been complied with. It would simply impose another compliance burden on some promoters in certain circumstances. 
 The Government recognise that there are concerns about the way in which the disclosure rules apply where there are multiple promoters for one scheme, and I have outlined some of the steps that will be taken to address those concerns. I shall not try your patience, Mr. McWilliam, by going over the steps again, but they will be included in the revised regulations, to which I referred in the debate on clause 290. The changes will ensure that only those at the heart of the scheme or arrangement are treated as the promoters. I hope that that deals with the points raised by the hon. Member for Arundel and South Downs. I am happy to offer, even before he asks me, to write to him to reiterate the points that I made on clause 290 and to say why that would be the case, instead of repeating it now. 
 Taxpayers who use the notifiable schemes are required by clause 297 as part of their normal tax return to provide the Revenue with the scheme number, and they must also disclose when they expect the tax advantage relating from the notifiable arrangements to arise. Amendment No. 6 would remove the latter obligation, but by doing so it would lead to unnecessary inquiries into the taxpayers' tax returns. Again, I can see the hon. Gentleman's motivation, but the amendment could increase inquiries, and we should avoid that. 
 Clause 297 also requires taxpayers to put the number on their tax return every year until any tax advantage arising from the scheme has been exhausted. The aim is to enable the Revenue to see in which year or years there is tax at risk. The Revenue will want to consider making inquiries into taxpayers' 
 tax returns for these years, in accordance with the normal risk assessments. 
 The amendment would deny the Revenue that information—I hope that I will be forgiven for again stretching beyond the clause by referring to such powers. That would cause the Revenue to commence inquiries in some cases when no tax was at risk. That would not only be a waste of Revenue time but create additional and unnecessary compliance burdens for the taxpayer for all the reasons that we have previously discussed with regard to these clauses. 
 The Government are of the view that those who use the schemes at which the rules are aimed will have no difficulty in knowing the time when the tax advantage arises, either because the promoter will tell them, or because they will have designed the scheme themselves. 
 I turn to the Government amendments grouped here, apart from Government amendment No. 559. Those amendments deal with the power to prescribe in regulations the form and manner in which the information about notifiable schemes is provided to the Revenue. They address two points. First, an inconsistency in the language has raised questions as to whether it means different things in different places. For example, clauses 292, 293 and 294 refer to information ''in the prescribed manner'', but clause 296 refers to ''the prescribed form'' alone. Meanwhile, clause 297 refers to 
''the prescribed form and manner'',
 and to 
''the prescribed time or times''.
 We concede that that could lead to uncertainty. Therefore, the amendments tidy things up by using standard wording. 
 Secondly, as it is currently drafted, the legislation requires Revenue forms on which disclosure is to be made to be prescribed in regulations. It would be inappropriate for Parliament to introduce a new statutory instrument each time the Revenue wishes to make a minor change to the form. Accordingly, these amendments remove the power of the Board of Inland Revenue to prescribe the form and manner of disclosures in regulations and replace it with a power to specify the form and manner through the Revenue's normal administrative processes. 
 Parliamentary draftsmen have inserted a new clause, rather than an amendment to the existing clause. I am advised that it would be inappropriate to include it in any existing clauses. I would be happy to share the reasons why with the Committee but, for time's sake, I think we are all prepared to accept the wisdom of parliamentary counsel on this issue. 
 It is important to recognise that these amendments together with the new clause do not give the Board any new power. Any change in the content of the form affecting the information to be disclosed will continue to require new regulations. 
 Government amendment No. 559 makes a drafting change to ensure that there is no inconsistency in language between clauses 292 and 295. The duties of a promoter are described in clause 292. As currently drafted, it refers to ''proposed arrangements'', which is 
 a term that is not defined and does not appear elsewhere in the clauses. During consultation, the Revenue received representations that the use of the term creates confusion and the amendment therefore removes that reference and replaces it with 
''notifiable arrangements implementing the notifiable proposal''.
 That makes the language consistent with that in clause 295(1), which refers to ''notifable arrangements'' and to ''notifiable proposal''. Both of those terms are defined in clause 290. 
 As a result of those concluding remarks, I hope that the hon. Member for Arundel and South Downs will accept that his proposed amendments do not achieve the effect that he desires and that at present no convincing argument has been advanced as to why five days should not remain the period in the legislation. I entirely accept that some have expressed a preference for a longer period, but that is not justified. I, therefore, ask him to consider his position on that and I commend the Government amendments to the Committee.

Rob Marris: The Government amendments have been ably explained by the Paymaster General. As I understand them, they are mostly a tidying-up exercise. Amendments Nos. 4 and 6 are not so much about that. We have already dealt with amendment No. 3 under clause 291. For obvious, reasons amendment No. 5 was not selected, because it can be dealt with by a stand part debate on clause 294. My understanding is that, as a general indication, the lower the amendment number, the earlier it was tabled. That does not necessarily mean that amendment No. 4 was the fourth that was tabled, but there is a strong tendency that a low amendment number indicates an amendment that was tabled early. As I understand it, they are batched together. This is putting a slight gloss on it, but that suggests to me that four of the top six amendments—

John McWilliam: Order. May I assist the hon. Gentleman? Amendments are numbered as they come in. They are grouped as they occur in the Bill.

Rob Marris: They are grouped as they occur in the Bill, of course. It is the numbering to which I refer. It is putting a slight gloss on the matter, but I think that four of the first six Conservative amendments deal with part 7 and are designed to make life easier for those who wish to run tax-avoidance schemes. I think that that is very telling.

Howard Flight: The hon. Gentleman might be pleased to know that they were amendments that were suggested by Mr. Edward Troup, who is now working for the Treasury, on the ground that he felt that the Government's proposals were unsatisfactory from a legal point of view. They were tabled early because he knew that he was changing jobs and that he needed to table them in good time.

Rob Marris: I stand to be corrected but I do not think that Edward Troup tabled the amendments. That was done by hon. Members.

Howard Flight: I will take that back, because I do not know whether it was true. However, I asked Mr. Troup to sort out the amendments early.

Rob Marris: I think that that ably reinforces my point and I am grateful to the hon. Gentleman. Which amendments did he seek to be tabled early? The very ones that make life easier for tax avoiders. I rest my case.

Howard Flight: I think that the hon. Gentleman raised an extremely unfair issue. Let me put the record straight lest there be misunderstanding. I consulted Edward Troup upfront about the measures relating to VAT and those relating to the clauses that we are discussing. I was unable to speak to him subsequently, because he advised me that he had changed his job. Therefore, I mis-stated what I said earlier.

Dawn Primarolo: I am sure that the hon. Gentleman would agree that anyone who works for the Government will be ensuring that the Government's policy is delivered, and will be in agreement with that.

Howard Flight: I am sure what the Paymaster General has said is correct, but there are some technical issues to be dealt with. She has said that the point raised by amendment No. 4 is being dealt with in regulations. Therefore, we are at one. With regard to amendment No. 6, she said that she entirely understood the motivation and that, while the amendment did not actually work, she realised the thinking behind it. Neither of those amendments attempt to gain advantage for those seeking to avoid tax, nor do they achieve any. I think that the hon. Member for Wolverhampton, South-West has got his motivation wrong.
 The Paymaster General resisted amendment No. 368, talking about avoidance schemes that are being promoted. If that is what these clauses are about, I have no disagreement with her. That has been the issue throughout. If we are essentially talking about avoidance schemes that are being promoted, we are on common ground. There is no problem reporting them within five days. The simple issue that I raise again is that it seems to me and to many others that the clauses and regulations, as they stand, include bespoke tax advice for situations such as takeovers. Things move around the whole time in such situations, where no one is concerned with pre-packaged schemes. The Paymaster General may appreciate that there are potential problems. If she is in effect confirming that we are talking about pre-packaged schemes, my case disappears. If she definitely wants the arrangements to continue potentially to encompass wide situations of tax structuring in relation to commercial activities, I will ask her to rethink as she works on the regulations, because the five-day period is impractical.

John Burnett: The hon. Gentleman will have heard my intervention apropos amendment No. 368. Does not he agree that there could in some circumstances be a promoter who is unaware that the arrangements are for tax avoidance, or that the transaction concerned forms part of tax-avoidance arrangements, and that, in those circumstances, there should not be a liability on such a person?

Howard Flight: Everyone knows when they are promoting tax-avoidance schemes. When lawyers and accountants give tax advice for takeovers and other commercial arrangements, we are into what I describe
 as grey territory. The whole debate throughout these clauses has been on where one draws the line, and I believe that that will be the problem with these provisions. One risks either a welter of reporting because advisers will want to ensure that they are not criticised for not reporting what they should have reported, and then the Revenue team will have an impossible burden to deal with; or, as we have argued, a greater filtering and sharpening up that leaves these clauses essentially concerned with tax-avoidance schemes that are promoted as such. If that is the name of the game, it is relatively straightforward, but it is because of the continuing greyness about how far into tax planning the reporting requirements go that both amendment No. 368 and the point made by the hon. Member for Torridge and West Devon arise.
 If someone is advising the board of Marks and Spencer on the present takeover situation, and that advice includes tax issues—their advice on tax would be bound to include advice as to how to minimise tax—is that required to be reported?

John Burnett: I am trying to think of a practical example to demonstrate what I said earlier. The Paymaster General has an amused look, but I am going to do my best. It could be that someone giving detailed corporate tax advice as a specialist gives a corporate plan, perhaps to comply with stock exchange regulations, and the plan is used and taken to tax specialists. There is such a level of expertise and specialisation in such matters regarding stock exchange rules, corporation and company law and tax law that a line must be drawn somewhere. I hope that the hon. Gentleman agrees that it is for the Paymaster General to ensure that the person who has to make the notification should be aware of the tax aspects of the case, and should be involved in dealing with them.

Howard Flight: I thank the hon. Gentleman for that explanation, with which I agree. I accept that the Paymaster General has said things today that filter—I think that is the word she used—what is to be required quite significantly, but, at the risk of becoming repetitive, I must say that all the lawyers and accountants to whom I have spoken are concerned about where the boundary will be drawn.
 As I have said three times already: my strongest advice, as the Government finish the regulations, is to focus on what the Paymaster General says—that where schemes are being promoted, everyone knows entirely what they are doing and will have no difficulty in reporting in good time.

Dawn Primarolo: Let us be clear. The hon. Gentleman is talking about amendment No. 368, which does not raise any of those issues. It raises only the issue of whether the period for notifying should be five or 30 days. I made the point that the promoter will know the relevant information at five days and at 30 days, so the period will be five days. He cannot seriously suggest that an adviser would give professional advice to a company without knowing
 what they were advising. That is simply incomprehensible.

Howard Flight: The Paymaster General is being rather unfair, in that, in speaking to the amendment I made the point that if my point is taken, what is needed is a wider redraft of the clause that leaves a period of five days for promoters of schemes, and a more reasonable period for bespoke tax advice about deals. I also explained in some detail, and perhaps at too great length, the process of tax advice in a commercial deal takeover situation, and how it is completely different from the situations that she describes. This is not a huge point, but realistically, it will be difficult to get reports in within five days if accountants and lawyers giving advice in takeover situations think that they ought to report some tax structuring. I hope, from what she has said, that she is not expecting reports in those situations.

Dawn Primarolo: Can I just refer the hon. Gentleman to what I said about the revised regulations to be published and the exclusions from the definition of promoter? That deals with the question that the hon. Member for Torridge and West Devon raised about the separation of advice when dealing with company law aspects of a scheme as opposed to tax.

Howard Flight: I am afraid that there is still a lack of clarity in a very simple area, which lies at the heart of concerns about the clauses. Unless the regulations filter rather more, there will be great problems, misunderstandings and concerns, not over the marketing of packaged schemes, if they continue to exist, but over tax advice on commercial deals. I am sure that the Paymaster General must appreciate that very simple point, and I will not repeat it ad nauseam. I do not find her language quite sharp or clear enough, but I hope that she is saying, in everyday language, that the arrangements are intended to apply to promoters and not to tax advice in the normal course of business or takeover activities. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Amendments made: No. 558, in 
clause 292, page 242, line 7, leave out 'in the prescribed manner'.
 No. 559, in 
clause 292, page 242, line 13, leave out 'the proposed arrangements' and insert 
 'notifiable arrangements implementing the notifiable proposal'.
 No. 560, in 
clause 292, page 242, line 16, leave out 'in the prescribed manner'.—[Dawn Primarolo.]
 Clause 292, as amended, ordered to stand part of the Bill.

Clause 293 - Duty of person dealing with promoter outside United Kingdom

Amendment made: No. 561, in 
clause 293, page 242, line 34, leave out 'in the prescribed manner'.—[Dawn Primarolo.]
 Clause 293, as amended, ordered to stand part of the Bill.

Clause 294 - Duty of parties to notifiable arrangements not involving promoter

Amendment made: No. 562, in 
clause 294, page 243, line 1, leave out 'in the prescribed manner'.—[Dawn Primarolo.]
 Question proposed, That the clause, as amended, stand part of the Bill.

Howard Flight: The provisions, as described, should be targeted at least initially at marketed schemes that are being promoted. The clause imposes an obligation on a taxpayer who enters into arrangements without the involvement of outside advisers. Such an obligation should be limited to his final ordinary, self-assessment requirements, and the clause illustrates the fundamental point that I have been trying to make throughout, namely that the requirements have moved well wide of the reporting of unacceptable schemes.

Rob Marris: I am surprised at the hon. Gentleman's remarks, because the second word in the clause is ''person'', and that can apply to a company. A company may have in-house advice and no external promoter, but with in-house advice it may be setting up a tax-avoidance scheme that could and should be notifiable. The clause would cover that, and the clauses relating to promoters that we discussed earlier would not.

Howard Flight: I accept that ''person'' could mean a company. However, I was seeking to make a point about a person as an individual, and not about in-house arrangements.
 Question put and agreed to. 
 Clause 294, as amended, ordered to stand part of the Bill.

Clause 295 - Arrangements to be given reference number

Amendment made: No. 563, in 
clause 295, page 243, line 10, at end insert— 
 '( ) The allocation of a reference number to any notifiable arrangements (or proposed notifiable arrangements) is not to be regarded as constituting any indication by the Board that the arrangements could as a matter of law result in the obtaining by any person of a tax advantage.'.—[Dawn Primarolo.]
 Clause 295, as amended, ordered to stand part of the Bill.

Clause 296 - Duty of promoter to notify client of number

Amendment made: No. 564, in 
clause 296, page 243, line 16, leave out 'in the prescribed form'.—[Dawn Primarolo.]
 Clause 296, as amended, ordered to stand part of the Bill.

Clause 297 - Duty of parties to notifiable arrangements to notify Board of number, etc.

Amendments made: No. 565, in 
clause 297, page 243, line 29, leave out 
 'at the prescribed time or times'.
 No. 566, in 
clause 297, page 243, line 30, leave out 
 'in the prescribed form and manner'.
 No. 567, in 
clause 297, page 243, line 40, at beginning insert 'in prescribed cases'.
 No. 568, in 
clause 297, page 243, line 43, leave out paragraph (b) and insert— 
 '(b) in prescribed cases, require the number and other information to be provided separately to the Board at the prescribed time or times.'.—[Dawn Primarolo.]
 Clause 297, as amended, ordered to stand part of the Bill.

Clause 298 - Legal professional privilege

Howard Flight: I beg to move amendment No. 369, in
clause 298, page 244, line 22, at end insert 
 'but Legal Professional Privilege does not subsist in a way in which prevents compliance with this part of the Act'.
 We have already focused on the definition of promoter, which has caused difficulties, in clause 291. The Inland Revenue is clear that the definition is worded in such a way as to catch all concerned—accounting firms, legal firms, counsel, banks other than in the course of their normal lending business, and, to a limited extent, in-house tax teams. However, it is not as clear as it might be. We have already touched on the Government amendments that would make it clear that banks are involved. More importantly, there is considerable argument about the extent to which lawyers, within law firms and the Bar, are caught by the provisions. Some contend that legal professional privilege means that they do not have to comply with the provisions; I understand that the Inland Revenue contends that clause 298 is sufficient to ensure that lawyers can comply, in that, fundamentally, there is no requirement to disclose the names of clients. 
 However, I understand that some members of the Bar feel that Bar Council rules will prevent their compliance. If lawyers are to any extent exempt from these rules, the system will not apply as the Government want, for obvious reasons. The amendment would put the issue beyond doubt.

John Burnett: I have already disclosed that I am a lawyer, although I do not practise. To be even-handed, I should allude to points made by the Institute of Chartered Accountants. It would like the Inland Revenue to clarify some things. I would be grateful if the Minister would clarify her interpretation of the interaction between legal professional privilege and the duty to make a return under clause 298.
 Another important thrust among the ICA's submissions is its anxiety to know whether the clause 
 might create a competitive advantage for those covered by legal professional privilege, compared with those who do not enjoy such a privilege. I look forward to hearing the Minister's response to those two points.

Rob Marris: On the comments made by the hon. Members for Arundel and South Downs and for Torridge and West Devon, I think that it would help if the Minister gave some examples. As a member of the Law Society, albeit non-practising, because I do not believe in moonlighting, I have the society's brief on the Bill, which does not suggest any amendment whatever to the clause.

Dawn Primarolo: The amendment would define the operation of legal professional privilege in relation to the disclosure rules. Not only would that not work, but it is inappropriate to attempt to define the scope of legal professional privilege for the purposes of the disclosure rules in that way. Whether particular items are subject to legal professional privilege is ultimately a matter for the courts. As the material provided by the promoter will be anonymised, we do not think that any question of legal professional privilege will normally arise, even if a lawyer makes the disclosure.
 I should remind the Committee, however, that the law on legal professional privilege is in a state of flux, following a decision by the Court of Appeal in the case of Three Rivers Council v. Bank of England (No. 10). I understand that there will be an appeal against the decision, which may lead to a revision in the law on such matters. The clause as drafted makes it explicit that no disclosure of privileged information will be required under that measure. That is probably why we have not heard from the Law Society—the provisions are pretty clear.

John McWilliam: Order. Let me give the Committee my general caution about entering into areas of sub judice. We can get into a lot of trouble if we are not careful.

Dawn Primarolo: Indeed, Mr. McWilliam—those are my final comments on that matter.
 The clause explicitly provides that the disclosure rules do not override legal professional privilege, but that does not prevent compliance with the disclosure rules. There is no requirement to disclose details of clients or to provide copies of documents or planning advice. We have taken note of what happens elsewhere. The hon. Member for Arundel and South Downs asked earlier whether we had taken note of what happens in the US. That case, among others, is a classic example of where we have done so. 
 To approach the matter from a different direction, the interesting question is whether the exclusion of legal professional privilege distorts competition. In whichever way the Government seem to be going, someone has a criticism in aid of maintaining the status quo. The argument is that the provisions would somehow give lawyers a competitive advantage. Perish the thought, Mr. McWilliam.

John McWilliam: Order. The Minister is no danger of insulting me—I am a humble engineer.

Dawn Primarolo: Perish the thought that the Government would wish to enter the debate about the balance of competition between accountants and solicitors. The rules apply equally to all persons involved in marketing, or advising on or assisting in the implementation of disclosable schemes. Far from being anti-competitive—we would not dream of that—the rules help to redress the balance in favour of those businesses that suffer an unfair competitive disadvantage owing to the exploitation of avoidance schemes. That point goes to very heart of the clause.
 I hope that hon. Members are reassured. I am certainly reassured, because I am sure that I would have heard from the Law Society if I had inadvertently entered the field of legal professional privilege. It is never shy about putting its view forward, and that is always much welcomed. 
 I hope that I have reassured the hon. Gentleman not only that the amendment is not necessary, but that the ground is clearly laid out.

Howard Flight: May I suggest that the Paymaster General's comments about the Law Society and lawyers would be relevant if the matter were to their disadvantage? However, as the measure may or may not be to their advantage, it is fairly unlikely that they would have raised the issue.
 By comparison, as my hon. Friend the Member for Torridge and West Devon pointed out, the accountants all seem to be hot under the collar, thinking that the lawyers may have a competitive advantage over them. I am glad to hear the Paymaster General confirm that they do not. 
 There is probably an issue about the advice of the Bar Council. I do not know precisely what that advice is, and if the Minister has it, that could resolve the issue. However, the point has essentially been answered: the Government will not achieve their objectives if any aspect of privilege, Bar Council rules or anything else would prevent a barrister from providing the information that he is supposed to provide.

Dawn Primarolo: I was trying not to repeat myself. I said in the debate on clause 290 that rule 702 of the Bar Council rules provides for confidentiality of barristers' papers. That is subject to the demands of the law, and so would not prevent disclosure to the Revenue in an appropriate case for the same reasons that I have explained with regard to solicitors.

Howard Flight: The Minister has convinced me. The Government will have at least a few months to work with the arrangements to test whether there are any problems. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 298 ordered to stand part of the Bill. 
 Clauses 299 to 301 ordered to stand part of the Bill.

Clause 302 - Part 7: commencement and savings

Howard Flight: I beg to move amendment No. 370, in page 246, line 39, leave out '1st August 2004' and insert '1st October 2004'.
 As I understand it, the Government have already accepted the point raised by the amendment. I have not taken in precisely how they will carry it out—whether they will amend clause 302 themselves or whether they will do it in the regulations. I think that the Government have accepted that the timetable was effectively too tight to be realistic, and I look forward to the Minister's confirmation of how the new timetable will be put into effect.

Dawn Primarolo: I do not want to try your patience, Mr. McWilliam. I would be repeating exactly what I said in the debate on clause 290, which will also now have to be announced publicly beyond the Committee so that those who are considering our procedure are suitably notified. We have dealt with the matter and the best thing to do is to ensure that that information is circulated to every member of the Committee. I will not repeat all the dates, which effectively clarify the requirements and dates for disclosure without disengaging on the employment sections—the anti-forestalling arrangements, which are still needed.
 I am confident that we have dealt with the point that the hon. Gentleman raises in amendment No. 370. At this late hour, I do not intend to try the Committee's patience by repeating myself.

Howard Flight: I completely agree that the Minister has set all that out, but as there are no Government amendments to clause 302, she has not answered my question as to how it will be done.

Dawn Primarolo: Forgive me, Mr. McWilliam—I thought that I had dealt with that point. It will be done through regulations, so when the revised draft regulations are published, the information will be changed in the way in which I have already indicated to the Committee. I think that I have now successfully dealt with the points raised by the hon. Gentleman.

John McWilliam: Order. The hon. Lady need not trouble herself; she had said that previously.

Howard Flight: On the basis of the Minister's comments, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 302 ordered to stand part of the Bill. 
 Further consideration adjourned.—[Jim Fitzpatrick.] 
 Adjourned accordingly at twenty-six minutes past Six o'clock till Thursday 24 June at half-past Nine o'clock.